Pages: i-vi | Published: 12/2002 | DOI: 10.1111/j.1540-6261.2002.tb00685.x | Cited by: 0
Pages: vii-xlvi | Published: 12/2002 | DOI: 10.1111/j.1540-6261.2002.tb00688.x | Cited by: 0
Pages: 2379-2403 | Published: 12/2002 | DOI: 10.1111/1540-6261.00500 | Cited by: 429
Using plantâlevel observations from the Longitudinal Research Database I show that conglomerates are more productive than standâalone firms at a given point in time. Dynamically, however, firms that diversify experience a net reduction in productivity. While the acquired plants increase productivity, incumbent plants suffer. Moreover, stock prices track firm productivity and this tracking is equally strong for diversified and standâalone firms. Therefore, lower transparency of conglomerates is unlikely to explain the discrepancy between productivity and stock prices on average. Finally, I offer some evidence that this discrepancy may arise because conglomerates dissipate rents in the form of higher wages.
Pages: 2405-2447 | Published: 12/2002 | DOI: 10.1111/1540-6261.00501 | Cited by: 107
Martin D. D. Evans
I examine the sources of exchange rate dynamics by focusing on the information structure of FX trading. This structure permits the existence of an equilibrium distribution of transaction prices at a point in time. I develop and estimate a model of the price distribution using data from the Deutsche mark/dollar market that prroduces two striking results: (1) Much of the shortâterm volatility in exchange rates comes from sampling the heterogeneous trading decisions of dealers in a distribution that, under normal market conditions, changes comparatively slowly; (2) public news is rarely the predominant source of exchange rate movements over any horizon.
Pages: 2449-2478 | Published: 12/2002 | DOI: 10.1111/1540-6261.00502 | Cited by: 193
S.G. Badrinath, Sunil Wahal
We document the equity trading practices of approximately 1,200 institutions from the third quarter of 1987 through the third quarter of 1995. We decompose trading by institutions into the initiation of new positions (entry), the termination of previous positions (exit), and adjustments to ongoing holdings. Institutions act as momentum traders when they enter stocks but as contrarian traders when they exit or make adjustments to ongoing holdings. We find significant differences in trading practices among different types of institutions.
Pages: 2479-2506 | Published: 12/2002 | DOI: 10.1111/1540-6261.00503 | Cited by: 151
Robert Gertner, Eric Powers, David Scharfstein
Pages: 2507-2532 | Published: 12/2002 | DOI: 10.1111/1540-6261.00504 | Cited by: 134
Jennifer Conrad, Bradford Cornell, Wayne R. Landsman
We examine whether the price response to bad and good earnings shocks changes as the relative level of the market changes. The study is based on a complete sample of annual earnings announcements during the period 1988 to 1998. The relative level of the market is based on the difference between the current market P/E and the average market P/E over the prior 12 months. We find that the stock price response to negative earnings surprises increases as the relative level of the market rises. Furthermore, the difference between bad news and good news earnings response coefficients rises with the market.
Pages: 2533-2570 | Published: 12/2002 | DOI: 10.1111/1540-6261.00505 | Cited by: 1058
Mitchell A. Petersen, Raghuram G. Rajan
The distance between small firms and their lenders is increasing, and they are communicating in more impersonal ways. After documenting these systematic changes, we demonstrate they do not arise from small firms locating differently, consolidation in the banking industry, or biases in the sample. Instead, improvements in lender productivity appear to explain our findings. We also find distant firms no longer have to be the highest quality credits, indicating they have greater access to credit. The evidence indicates there has been substantial development of the financial sector, even in areas such as small business lending.
Pages: 2571-2594 | Published: 12/2002 | DOI: 10.1111/1540-6261.00506 | Cited by: 128
Gordon Gemmill, Dylan C. Thomas
If arbitrage is costly and noise traders are active, asset prices may deviate from fundamental values for long periods of time. We use a sample of 158 closedâend funds to show that noiseâtrader sentiment, as proxied by retailâinvestor flows, leads to fluctuations in the discount. Nevertheless, we reject the hypothesis that noiseâtrader risk is the cause of the longârun discount. Instead we find that funds which are more difficult to arbitrage have larger discounts, due to: (1) the censoring of the discount by the arbitrage bounds, and (2) the freedom of managers to increase charges when arbitrage is costly.
Pages: 2595-2617 | Published: 12/2002 | DOI: 10.1111/1540-6261.00507 | Cited by: 224
Michael Hertzel, Michael Lemmon, James S. Linck, Lynn Rees
Public firms that place equity privately experience positive announcements effects, with negative postâannouncement stockâprice performance. This finding is inconsistent with the underreaction hypothesis. Instead, it suggests that investors are overoptimistic about the prospects of firms issuing equity, regardless of the method of issuance. Further, in contrast to public offerings, private issues follow periods of relatively poor operating performance. Thus, investor overoptimism at the time of private issues is not due to the behavioral tendency to overweight recent experience at the expense of longâterm averages.
Pages: 2619-2650 | Published: 12/2002 | DOI: 10.1111/1540-6261.00508 | Cited by: 16
How do shareholders perceive managers who lever up under a takeover threat? Increasing leverage conveys good news if it reflects management's ability to enhance value. It conveys bad news, though, if inefficient managers are more pressured to lever up than the efficient ones. This paper demonstrates that negative updating may prevail. Managers who lever up to end a takeover threat may thus commit to enhance value and yet increase their chances of being replaced by their shareholders. The model provides implications for the dispersion of intraindustry leverage and for the stock price reaction to debtâforâequity exchanges.
Pages: 2651-2694 | Published: 12/2002 | DOI: 10.1111/1540-6261.00509 | Cited by: 471
Marco Pagano, Ailsa A. RĂ¶ell, Josef Zechner
This paper documents aggregate trends in the foreign listings of companies, and analyzes their distinctive prelisting characteristics and postlisting performance. In 1986â1997, many European companies listed abroad, mainly on U.S. exchanges, while the number of U.S. companies listed in Europe decreased. European companies that crossâlist tend to be large and recently privatized firms, and expand their foreign sales after listing abroad. They differ sharply depending on where they crossâlist: The U.S. exchanges attract highâtech and exportâoriented companies that expand rapidly without significant leveraging. Companies crossâlisting within Europe do not grow unusually fast, and increase their leverage after crossâlisting.
Pages: 2695-2740 | Published: 12/2002 | DOI: 10.1111/1540-6261.00510 | Cited by: 644
Kee-Hong Bae, Jun-Koo Kang, Jin-Mo Kim
We examine whether firms belonging to Korean business groups (chaebols) benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms (tunneling). We find that when a chaebolâaffiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebolâaffiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis.
Pages: 2741-2771 | Published: 12/2002 | DOI: 10.1111/1540-6261.00511 | Cited by: 1971
Stijn Claessens, Simeon Djankov, Joseph P. H. Fan, Larry H. P. Lang
Pages: 2773-2805 | Published: 12/2002 | DOI: 10.1111/1540-6261.00512 | Cited by: 225
This paper looks at internal capital markets in financial conglomerates by comparing the responses of small subsidiary and independent banks to monetary policy. I find that internal capital markets in financial conglomerates relax the credit constraints faced by smaller bank affiliates. Further analysis indicates that those markets lessen the impact of Fed policies on bank lending activity. The paper also examines the role of internal capital markets in influencing the investment allocation process of those conglomerates. My findings suggest that frictions between conglomerate headquarters and external capital markets are at the root of investment inefficiencies generated by internal capital markets.
Pages: 2807-2833 | Published: 12/2002 | DOI: 10.1111/1540-6261.00513 | Cited by: 487
Sandra E. Black, Philip E. Strahan
The literature is divided on the expected effects of increased competition and consolidation in the financial sector on the supply of credit to relationship borrowers. This paper tests whether policy changes fostering competition and consolidation in U.S. banking helped or harmed entrepreneurs. We find that the rate of new incorporations increases following deregulation of branching restrictions, and that deregulation reduces the negative effect of concentration on new incorporations. We also find the formation of new incorporations increases as the share of small banks decreases, suggesting that diversification benefits of size outweigh the possible comparative advantage small banks may have in forging relationships.
Pages: 2835-2840 | Published: 12/2002 | DOI: 10.1111/1540-6261.00514 | Cited by: 0
Book reviewed in this article:
Pages: 2841-2842 | Published: 12/2002 | DOI: 10.1111/1540-6261.00515 | Cited by: 0
Pages: 2843-2846 | Published: 12/2002 | DOI: 10.1111/j.1540-6261.2002.tb00686.x | Cited by: 0
Pages: 2847-2848 | Published: 12/2002 | DOI: 10.1111/j.1540-6261.2002.tb00687.x | Cited by: 0
Pages: 2849-2856 | Published: 12/2002 | DOI: 10.1111/1540-6261.00516 | Cited by: 0