Search results: 50.
Market Created Risk
Published: 7/1989, Volume: 44, Issue: 3 | DOI: 10.1111/j.1540-6261.1989.tb04378.x | Cited by: 28
ALAN KRAUS, MAXWELL SMITH
We develop a multiperiod rational expectations model of securities market equilibrium in which equilibrium prices may move between periods even though it is common knowledge that no new information has arrived about ultimate security payoffs. This happens because investors know they have imperfect information about the endowments of other investors and this knowledge affects their probability beliefs about the prices that will prevail at the intermediate trading date. These beliefs are reflected in the equilibrium at the initial trading date when investors focus on the probabilities of intermediate capital gains and losses, rather than ultimate payoffs.
THE EQUALIZING EFFECTS OF FEDERAL GRANTS
Published: 5/1954, Volume: 9, Issue: 2 | DOI: 10.1111/j.1540-6261.1954.tb01224.x | Cited by: 2
James A. Maxwell
A Reply
Published: 3/1955, Volume: 10, Issue: 1 | DOI: 10.1111/j.1540-6261.1955.tb01565.x | Cited by: 1
James A. Maxwell
Do Spin‐offs Expropriate Wealth from Bondholders?
Published: 9/11/2003, Volume: 58, Issue: 5 | DOI: 10.1111/1540-6261.00598 | Cited by: 139
William F. Maxwell, Ramesh P. Rao
AbstractA wealth transfer from bondholders to stockholders is one of several hypotheses used to explain stockholder gains on the announcement of a spin‐off. However, previous empirical research has not found systematic evidence supporting the wealth expropriation hypothesis. Using a larger sample with comprehensive bond data, we find evidence consistent with wealth expropriation. Bondholders, on average, suffer a significant negative abnormal return during the month of the spin‐off announcement. However, even accounting for the loss to the bondholders, the aggregate value of the publicly traded debt and equity increases on a spin‐off announcement, suggesting that the wealth expropriation hypothesis is not a complete explanation of the stockholder gains. In explaining the magnitude of the losses to bondholders, we find they are a function of the loss in collateral in the spun‐off subsidiary and the level of financial risk of the parent firm. Consistent with a loss to bondholders, firms are more likely to have their credit rating downgraded than upgraded after a spin‐off. Additionally, consistent with the wealth transfer hypothesis, losses to bondholders tend to be more severe, the larger the gains to shareholders.
The Wealth Effects of Repurchases on Bondholders
Published: 3/21/2003, Volume: 58, Issue: 2 | DOI: 10.1111/1540-6261.00550 | Cited by: 203
William F. Maxwell, Clifford P. Stephens
Prior research has documented positive abnormal stock returns around the announcements of repurchase programs; several explanations of these returns have been suggested, including signaling, free cash flow, and wealth redistributions. This study analyzes abnormal stock, bond, and firm returns around repurchase announcements to examine these hypotheses. We find evidence consistent with both signaling and wealth redistribution. The loss to bondholders is a function of the size of the repurchase, and the risk of the firm's debt. We also find that bond ratings are twice as likely to be downgraded as upgraded after the announcement of the repurchase program.
Refinancing Risk and Cash Holdings
Published: 5/8/2014, Volume: 69, Issue: 3 | DOI: 10.1111/jofi.12133 | Cited by: 606
JARRAD HARFORD, SANDY KLASA, WILLIAM F. MAXWELL
We find that firms mitigate refinancing risk by increasing their cash holdings and saving cash from cash flows. The maturity of firms’ long‐term debt has shortened markedly, and this shortening explains a large fraction of the increase in cash holdings over time. Consistent with the inference that cash reserves are particularly valuable for firms with refinancing risk, we document that the value of these reserves is higher for such firms and that they mitigate underinvestment problems. Our findings imply that refinancing risk is a key determinant of cash holdings and highlight the interdependence of a firm's financial policy decisions.
Capital Commitment and Illiquidity in Corporate Bonds
Published: 7/12/2018, Volume: 73, Issue: 4 | DOI: 10.1111/jofi.12694 | Cited by: 302
HENDRIK BESSEMBINDER, STACEY JACOBSEN, WILLIAM MAXWELL, KUMAR VENKATARAMAN
We study trading costs and dealer behavior in U.S. corporate bond markets from 2006 to 2016. Despite a temporary spike during the financial crisis, average trade execution costs have not increased notably over time. However, dealer capital commitment, turnover, block trade frequency, and average trade size decreased during the financial crisis and thereafter. These declines are attributable to bank‐affiliated dealers, as nonbank dealers have increased their market commitment. Our evidence indicates that liquidity provision in the corporate bond markets is evolving away from the commitment of bank‐affiliated dealer capital to absorb customer imbalances, and that postcrisis banking regulations likely contribute.
An Examination of Long‐Term Abnormal Stock Returns and Operating Performance Following R&D Increases
Published: 3/25/2004, Volume: 59, Issue: 2 | DOI: 10.1111/j.1540-6261.2004.00644.x | Cited by: 729
Allan C. Eberhart, William F. Maxwell, Akhtar R. Siddique
We examine a sample of 8,313 cases, between 1951 and 2001, where firms unexpectedly increase their research and development (R&D) expenditures by a significant amount. We find consistent evidence of a misreaction, as manifested in the significantly positive abnormal stock returns that our sample firms' shareholders experience following these increases. We also find consistent evidence that our sample firms experience significantly positive long‐term abnormal operating performance following their R&D increases. Our findings suggest that R&D increases are beneficial investments, and that the market is slow to recognize the extent of this benefit (consistent with investor underreaction).
Further Evidence on the Value of a Priori Information
Published: 3/1980, Volume: 35, Issue: 1 | DOI: 10.1111/j.1540-6261.1980.tb03481.x | Cited by: 1
GARY SMITH
COST OF PROVIDING CONSUMER CREDIT: A STUDY OF FOUR MAJOR TYPES OF FINANCIAL INSTITUTIONS*
Published: 9/1962, Volume: 17, Issue: 3 | DOI: 10.1111/j.1540-6261.1962.tb04301.x | Cited by: 0
Paul Smith
DISCUSSION
Published: 5/1970, Volume: 25, Issue: 2 | DOI: 10.1111/j.1540-6261.1970.tb00667.x | Cited by: 1
Warren Smith
Public Information, IPO Price Formation, and Long‐Run Returns: Japanese Evidence
Published: 1/23/2009, Volume: 64, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01440.x | Cited by: 60
KENJI KUTSUNA, JANET KIHOLM SMITH, RICHARD L. SMITH
The price formation process of JASDAQ IPOs is more transparent than in the United States. The transparency facilitates analysis of important issues in the IPO literature—why offer prices only partially adjust to public information and adjust more fully to negative information, and why adjustments are related to initial returns. The evidence indicates that early price information conveys the underwriter's commitment to compensate investors for acquiring and/or disclosing information. Offer prices reflect pre‐IPO market values of public companies and implicit agreements between underwriters and issuers that originate well before the offering. Underadjustment of offer prices is substantially reversed in the aftermarket.
Evidence on the Determinants of Credit Terms Used in Interfirm Trade
Published: 6/1999, Volume: 54, Issue: 3 | DOI: 10.1111/0022-1082.00138 | Cited by: 625
Chee K. Ng, Janet Kiholm Smith, Richard L. Smith
AbstractTrade credit is created whenever a supplier offers terms that allow the buyer to delay payment. In this paper we document the rich variation in interfirm credit terms and credit policies across industries. We examine empirically the firm's basic credit policy choices: whether to extend credit or to require cash payment; and, if credit is extended, whether to adopt simple net terms or terms with discounts for prompt payment. We also examine determinants of variations in two‐part terms. Results are supportive primarily of theories that explain credit terms as contractual solutions to information problems concerning product quality and buyer creditworthiness.
ESTIMATING A GENERAL DISEQUILIBRIUM MODEL OF THE FINANCIAL SECTOR*
Published: 12/1973, Volume: 28, Issue: 5 | DOI: 10.1111/j.1540-6261.1973.tb01475.x | Cited by: 0
Gary N. Smith
GOVERNMENT FINANCIAL AID TO SMALL BUSINESS: FISCAL POLICY
Published: 6/1951, Volume: 6, Issue: 2 | DOI: 10.1111/j.1540-6261.1951.tb04453.x | Cited by: 0
Dan Throop Smith
ETHICAL DRUG INDUSTRY RETURN ON INVESTMENT*
Published: 12/1974, Volume: 29, Issue: 5 | DOI: 10.1111/j.1540-6261.1974.tb03149.x | Cited by: 0
Rodney F. Smith
THE EFFECT OF THE CORPORATE FINANCIAL PLAN ON THE CORPORATE RISK MANAGEMENT PROGRAM
Published: 5/1964, Volume: 19, Issue: 2 | DOI: 10.1111/j.1540-6261.1964.tb00772.x | Cited by: 1
W. B. Smith
Shareholder Activism by Institutional Investors: Evidence from CalPERS
Published: 3/1996, Volume: 51, Issue: 1 | DOI: 10.1111/j.1540-6261.1996.tb05208.x | Cited by: 836
MICHAEL P. SMITH
This study examines firm characteristics that lead to shareholder activism and analyzes the effects of activism on target firm governance structure, shareholder wealth, and operating performance for the 51 firms targeted by CalPERS over the 1987–93 period. Firm size and level of institutional holdings are found to be positively related to the probability of being targeted, and 72 percent of firms targeted after 1988 adopt proposed changes or make changes resulting in a settlement with CalPERS. Shareholder wealth increases for firms that adopt or settle and decreases for firms that resist. No statistically significant change in operating performance is found.
The Choice of Issuance Procedure and the Cost of Competitive and Negotiated Underwriting: an Examination of the Impact of Rule 50
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04580.x | Cited by: 23
RICHARD L. SMITH
Previous research suggests that firms choose negotiated issuance over competitive despite its apparently higher net interest cost. This result is shown to arise partly from failure to correct for a selectivity bias in the choice of issuance procedures. Two stage analysis is used in a model that includes qualitative and limited dependent variables to re‐estimate the net interest cost difference between competitive and negotiated issues. Results support the hypothesis that the choice of issuance procedure is consistent with shareholder wealth maximization. Examination of debt issues subject to Rule 50 of the Public Utility Holding Company Act indicates that the regulation, as applied, is not effective.
A TRANSITION MODEL FOR PORTFOLIO REVISION*
Published: 9/1967, Volume: 22, Issue: 3 | DOI: 10.1111/j.1540-6261.1967.tb02978.x | Cited by: 4
Keith V. Smith
INSTITUTIONAL ASPECTS OF INTERREGIONAL MORTGAGE INVESTMENT
Published: 5/1968, Volume: 23, Issue: 2 | DOI: 10.1111/j.1540-6261.1968.tb00811.x | Cited by: 3
Halbert C. Smith
THE RESPONSE OF STATE AND LOCAL GOVERNMENTS TO FEDERAL GRANT‐IN‐AID PAYMENTS*
Published: 6/1968, Volume: 23, Issue: 3 | DOI: 10.1111/j.1540-6261.1968.tb00839.x | Cited by: 0
David L. Smith
THE EQUAL CREDIT OPPORTUNITY ACT OF 1974: A COST/BENEFIT ANALYSIS
Published: 5/1977, Volume: 32, Issue: 2 | DOI: 10.1111/j.1540-6261.1977.tb03298.x | Cited by: 9
James F. Smith
THE CONCEPTS OF MONEY AND COMMERCIAL BANKS
Published: 12/1966, Volume: 21, Issue: 4 | DOI: 10.1111/j.1540-6261.1966.tb00271.x | Cited by: 4
Paul F. Smith
SENSITIVITY ANALYSIS OF RATES OF RETURN: COMMENT
Published: 12/1978, Volume: 33, Issue: 5 | DOI: 10.1111/j.1540-6261.1978.tb03433.x | Cited by: 1
W. James Smith
OPTIMUM RATE ON TIME DEPOSITS*
Published: 12/1962, Volume: 17, Issue: 4 | DOI: 10.1111/j.1540-6261.1962.tb04336.x | Cited by: 0
Paul F. Smith
PRICING POLICIES ON CONSUMER LOANS AT COMMERCIAL BANKS
Published: 5/1970, Volume: 25, Issue: 2 | DOI: 10.1111/j.1540-6261.1970.tb00677.x | Cited by: 7
Paul F. Smith
DEMAND FOR SHORT TERM GOVERNMENT DEBT*
Published: 3/1972, Volume: 27, Issue: 1 | DOI: 10.1111/j.1540-6261.1972.tb00638.x | Cited by: 0
Charles I. Smith
THE POSTWAR CANADIAN MORTGAGE MARKET AND THE ROLE OF GOVERNMENT*
Published: 9/1966, Volume: 21, Issue: 3 | DOI: 10.1111/j.1540-6261.1966.tb00266.x | Cited by: 0
Lawrence B. Smith
Trade Credit and Informational Asymmetry
Published: 9/1987, Volume: 42, Issue: 4 | DOI: 10.1111/j.1540-6261.1987.tb03916.x | Cited by: 641
JANET KIHOLM SMITH
Commonly used trade credit terms implicitly define a high interest rate that operates as an efficient screening device where information about buyer default risk is asymmetrically held. By offering trade credit, a seller can identify prospective defaults more quickly than if financial institutions were the sole providers of short‐term financing. The information is valuable in cases where the seller has made nonsalvageable investments in buyers since it enables the seller to take actions to protect such investments.
A Theoretic Framework for the Analysis of Credit Union Decision Making
Published: 9/1984, Volume: 39, Issue: 4 | DOI: 10.1111/j.1540-6261.1984.tb03899.x | Cited by: 91
DONALD J. SMITH
This paper presents a formal theoretic framework to analyze credit union interest rates on loans and savings deposits. The unique motivational and institutional features of a credit union, in particular its structure as a financial service cooperative, are used to develop the objective function. This is based on a comparison of the credit union's rates to alternatively available market rates and includes parameters to recognize the possibility of borrower‐saver conflict. The principal result is that the optimal rates and reactions to exogenous changes depend critically on the preference of the organization toward financial gain to the borrowing and saving members.
Structural Disequilibrium and the Banking Act of 1980
Published: 5/1982, Volume: 37, Issue: 2 | DOI: 10.1111/j.1540-6261.1982.tb03560.x | Cited by: 0
PAUL F. SMITH
THE OUTLOOK FOR FEDERAL RESERVE AND TREASURY POLICY*
Published: 5/1959, Volume: 14, Issue: 2 | DOI: 10.1111/j.1540-6261.1959.tb01588.x | Cited by: 0
Warren L. Smith
DISCUSSION
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02277.x | Cited by: 1
CLIFFORD W. SMITH
AN ANALYSIS OF THE EFFECTS OF THE REMOVAL OF THE YIELD CEILING ON FEDERALLY INSURED MORTGAGES IN CANADA
Published: 3/1977, Volume: 32, Issue: 1 | DOI: 10.1111/j.1540-6261.1977.tb03254.x | Cited by: 0
Lawrence B. Smith
UNCERTAINTY, INFORMATION AND INVESTMENT DECISIONS
Published: 3/1971, Volume: 26, Issue: 1 | DOI: 10.1111/j.1540-6261.1971.tb00589.x | Cited by: 6
R. G. E. Smith
THE VALUE OF A PRIORI INFORMATION IN ESTIMATING A FINANCIAL MODEL*
Published: 12/1976, Volume: 31, Issue: 5 | DOI: 10.1111/j.1540-6261.1976.tb03215.x | Cited by: 9
Gary Smith, William Brainard
A Disequilibrium Model of Savings and Loan Associations
Published: 12/1982, Volume: 37, Issue: 5 | DOI: 10.1111/j.1540-6261.1982.tb03618.x | Cited by: 1
GARY SMITH, WILLIAM BRAINARD
This paper discusses the consistent specification and estimation of asset demand equations in a disequilibrium model of financial markets. We estimate the effective asset demands of savings and loan associations, allowing for rationing in the mortgage market. These disequilibrium estimates are not very different from the estimates of notional demands with no rationing assumed. Savings and loans seem to be least affected by excess demand situations in that they are apparently not reluctant to raise mortgage rates and/or to ration borrowers.
Market Discounts and Shareholder Gains for Placing Equity Privately
Published: 6/1993, Volume: 48, Issue: 2 | DOI: 10.1111/j.1540-6261.1993.tb04723.x | Cited by: 393
MICHAEL HERTZEL, RICHARD L. SMITH
Despite selling at substantial discounts, private placements of equity are associated with positive abnormal returns. We find evidence that discounts reflect information costs borne by private investors and abnormal returns reflect favorable information about firm value. Results are consistent with the role of private placements as a solution to the Myers and Majluf underinvestment problem and with the use of private placements to signal undervaluation. We also find some evidence of anticipated monitoring benefits from private sales of equity. For the smaller firms that comprise our sample, information effects appear to be relatively more important than ownership effects.
Direct Equity Financing; A Resolution of a Paradox: A Comment
Published: 12/1984, Volume: 39, Issue: 5 | DOI: 10.1111/j.1540-6261.1984.tb04928.x | Cited by: 7
RICHARD L. SMITH, MANJEET DHATT
DISCUSSION
Published: 5/1964, Volume: 19, Issue: 2 | DOI: 10.1111/j.1540-6261.1964.tb00766.x | Cited by: 0
Tynan Smith, Robert W. Johnson
Death and Taxes: The Market for Flower Bonds
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04578.x | Cited by: 7
DAVID MAYERS, CLIFFORD W. SMITH
Certain U.S. Government securities, known as flower bonds, can be redeemed at par plus accrued interest for the purpose of paying estate taxes, if held at the time of death. Thus, a flower bond, selling at a discount, is like a straight bond plus a life insurance policy. An equilibrium derived from a rational flower bond pricing model implies the existence of clienteles: individuals with the highest death probabilities hold the deepest discount flower bonds. The empirical implication, that bonds with the deepest discount should be redeemed at the fastest rate, is tested and the results support the proposition.
The Maturity Structure of Corporate Debt
Published: 6/1995, Volume: 50, Issue: 2 | DOI: 10.1111/j.1540-6261.1995.tb04797.x | Cited by: 1317
MICHAEL J. BARCLAY, CLIFFORD W. SMITH
We provide an empirical examination of the determinants of corporate debt maturity. Our evidence offers strong support for the contracting‐cost hypothesis. Firms that have few growth options, are large, or are regulated have more long‐term debt in their capital structure. We find little evidence that firms use the maturity structure of their debt to signal information to the market. The evidence is consistent, however, with the hypothesis that firms with larger information asymmetries issue more short‐term debt. We find no evidence that taxes affect debt maturity.
Does the Medium Matter? The Relations among Bankruptcy Petition Filings, Broadtape Disclosure, and the Timing of Price Reactions
Published: 6/1998, Volume: 53, Issue: 3 | DOI: 10.1111/0022-1082.00047 | Cited by: 8
Mark C. Dawkins, Linda Smith Bamber
Drawing on a comprehensive sample of 330 bankruptcy petition filings from 1980 to 1993, we find that most of the market reaction does not occur on the bankruptcy petition filing date when the information becomes publicly available. Rather, most of the reaction occurs when news of the bankruptcy filing is more widely disseminated via the Broadtape. This “Broadtape announcement effect” persists after controlling for firm size, exchange listing, and predisclosure information. These are primarily timing differences since abnormal returns cumulated over an 11–day window centered on the filing date do not differ significantly across Broadtape disclosure date classifications.
The Priority Structure of Corporate Liabilities
Published: 7/1995, Volume: 50, Issue: 3 | DOI: 10.1111/j.1540-6261.1995.tb04041.x | Cited by: 232
MICHAEL J. BARCLAY, CLIFFORD W. SMITH
Most discussions of corporate capital structure effectively assume that all debt is the same. Yet debt differs by maturity, covenant restrictions, conversion rights, call provisions, and priority. Here, we examine priority structure across a sample of 4995 COMPUSTAT industrial firms from 1981 to 1991. We analyze the variation in the use of capital leases, secured debt, ordinary debt, subordinated debt, and preferred stock both as a fraction of the firm's market value and as a fraction of total fixed claims. Our evidence provides consistent support for contracting cost hypotheses, mixed support for tax hypotheses, and little support for the signaling hypothesis.
A REPLY
Published: 9/1970, Volume: 25, Issue: 4 | DOI: 10.1111/j.1540-6261.1970.tb00565.x | Cited by: 0
Keith V. Smith, John C. Schreiner
EFFICIENT ESTIMATION OF MULTIVARIATE FINANCIAL RELATIONSHIPS
Published: 12/1974, Volume: 29, Issue: 5 | DOI: 10.1111/j.1540-6261.1974.tb03124.x | Cited by: 3
Richard G. Marcis, V. Kerry Smith
POST ACCORD INTEREST RATES: A REPLY
Published: 9/1974, Volume: 29, Issue: 4 | DOI: 10.1111/j.1540-6261.1974.tb03111.x | Cited by: 1
V. Kerry Smith, Richard G. Marcis
The Conditional Performance of Insider Trades
Published: 4/1998, Volume: 53, Issue: 2 | DOI: 10.1111/0022-1082.205263 | Cited by: 140
B. Espen Eckbo, David C. Smith
This paper estimates the performance of insider trades on the closely held Oslo Stock Exchange (OSE) during a period of lax enforcement of insider trading regulations. Our data permit construction of a portfolio that tracks all movements of insiders in and out of the OSE firms. Using three alternative performance estimators in a time‐varying expected return setting, we document zero or negative abnormal performance by insiders. The results are robust to a variety of trade characteristics. Applying the performance measures to mutual funds on the OSE, we also document some evidence that the average mutual fund outperforms the insider portfolio.
Disclosing to Informed Traders
Published: 12/17/2023, Volume: 79, Issue: 2 | DOI: 10.1111/jofi.13296 | Cited by: 16
SNEHAL BANERJEE, IVÁN MARINOVIC, KEVIN SMITH
We develop a model in which a firm's manager can voluntarily disclose to privately informed investors. In equilibrium, the manager only discloses sufficiently favorable news. If the manager is known to be informed but disclosure is costly, the probability of disclosure increases with market liquidity and the stock trades at a discount relative to expected cash flows. However, when investors are uncertain about whether the manager is informed, disclosure can decrease with market liquidity and the stock can trade at a premium relative to expected cash flows. Moreover, contrary to common intuition, public information can
crowd in
more voluntary disclosure.