The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Spinoff and Merger Ex‐Date Effects
Published: 06/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb05153.x
ANAND M. VIJH
This article shows that some of the wealth gains from financial decisions involving changes in security form occur on predictable ex dates. For a sample of 113 spinoffs during 1964 to 90, we document an average excess return of 3.0 percent on ex dates, roughly the same magnitude as the average announcement‐date return. We conjecture that the spinoff ex‐date return arises because the parent and subsidiary stocks attract different investors who prefer to buy the separated shares after the ex date. We also document that, on average, the target shareholders in stock‐for‐stock mergers earn an excess return of 1.5 percent on merger ex dates.
The Spinoff and Merger Ex‐Date Effects
Published: 06/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb05153.x
ANAND M. VIJH
This article shows that some of the wealth gains from financial decisions involving changes in security form occur on predictable ex dates. For a sample of 113 spinoffs during 1964 to 90, we document an average excess return of 3.0 percent on ex dates, roughly the same magnitude as the average announcement‐date return. We conjecture that the spinoff ex‐date return arises because the parent and subsidiary stocks attract different investors who prefer to buy the separated shares after the ex date. We also document that, on average, the target shareholders in stock‐for‐stock mergers earn an excess return of 1.5 percent on merger ex dates.
Liquidity of the CBOE Equity Options
Published: 09/01/1990 | DOI: 10.1111/j.1540-6261.1990.tb02431.x
ANAND M. VIJH
We examine the CBOE option market depth and bid‐ask spreads. Absence of price effects surrounding large option trades suggests excellent market depth. However, bid‐ask spreads for the CBOE options and the NYSE stocks are nearly equal, even though an average option is equivalent to less than half a stock plus borrowing. We explain this tradeoff between market depth and bid‐ask spreads on the CBOE and the NYSE by differences in market mechanisms. We also show that the adverse‐selection component of the option spread, which measures the extent of information‐related trading on the CBOE, is very small.
Trading Behavior and the Unbiasedness of the Market Reaction to Dividend Announcements
Published: 03/01/1995 | DOI: 10.1111/j.1540-6261.1995.tb05173.x
MUKESH BAJAJ, ANAND M. VIJH
This article examines the price formation process during dividend announcement day, using daily closing prices and transactions data. We find that the unconditional positive excess returns, first documented by Kalay and Loewenstein (1985), are higher for small‐firm and low‐priced stocks. Price volatility and trading volume also increase during this period. Examination of trade prices relative to the bid‐ask spread and volume of trades at bid and asked prices shows that the excess returns cannot be attributed to measurement errors or to spillover effects of tax‐related ex‐day trading. Rather, the price behavior is related to the absorption of dividend information.
Incentive Effects of Stock and Option Holdings of Target and Acquirer CEOs
Published: 08/14/2007 | DOI: 10.1111/j.1540-6261.2007.01260.x
JIE CAI, ANAND M. VIJH
Acquisitions enable target chief executive officers (CEOs) to remove liquidity restrictions on stock and option holdings and diminish the illiquidity discount. Acquisitions also enable acquirer CEOs to improve the long‐term value of overvalued holdings. Examining all firms during 1993 to 2001, we show that CEOs with higher holdings (illiquidity discount) are more likely to make acquisitions (get acquired). Further, in 250 completed acquisitions, target CEOs with a higher illiquidity discount accept a lower premium, offer less resistance, and more often leave after acquisition. Similarly, acquirer CEOs with higher holdings pay a higher premium, expedite the process, and make diversifying acquisitions using stock payment.
Do Long‐Term Shareholders Benefit From Corporate Acquisitions?
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb02741.x
TIM LOUGHRAN, ANAND M. VIJH
Using 947 acquisitions during 1970–1989, this article finds a relationship between the postacquisition returns and the mode of acquisition and form of payment. During a five‐year period following the acquisition, on average, firms that complete stock mergers earn significantly negative excess returns of −25.0 percent whereas firms that complete cash tender offers earn significantly positive excess returns of 61.7 percent. Over the combined preacquisition and postacquisition period, target shareholders who hold on to the acquirer stock received as payment in stock mergers do not earn significantly positive excess returns. In the top quartile of target to acquirer size ratio, they earn negative excess returns.