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 Effects of Stock Repurchases on Rival Firms
Published: 06/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb02681.x
MICHAEL G. HERTZEL
This paper investigates the stock price behavior of rival firms in the same industry as firms announcing stock repurchase tender offers. Using a sample of 134 repurchase announcements, I find that rival firms on average realize insignificant announcement period abnormal returns. Negative rival stock price performance is detected over longer intervals surrounding the announcement period and for a subset of announcements which ex ante were identified as most likely to affect rivals. This evidence, however, is statistically weak and does little to alter the overall conclusion that the information in repurchase announcements is primarily firm‐specific.
Market Discounts and Shareholder Gains for Placing Equity Privately
Published: 06/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04723.x
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.
Long‐Run Performance following Private Placements of Equity
Published: 12/17/2002 | DOI: 10.1111/1540-6261.00507
Michael Hertzel, Michael Lemmon, James S. Linck, Lynn Rees
Public firms that place equity privately experience positive announcements effects, with negative post‐announcement stock‐price 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 long‐term averages.
The Market Impact of Trends and Sequences in Performance: New Evidence
Published: 09/16/2005 | DOI: 10.1111/j.1540-6261.2005.00807.x
GREGORY R. DURHAM, MICHAEL G. HERTZEL, J. SPENCER MARTIN
Bloomfield and Hales (2002) find strong evidence that experimental market subjects are influenced by trends and patterns in a manner supportive of the shifting regimes model of Barberis, Shleifer, and Vishny (1998). We subject the model to further empirical scrutiny using the football wagering market as our price laboratory. Sports betting markets have several advantages over traditional capital markets as an empirical setting, and commonalities with traditional markets allow for useful insights. We find scant evidence that investors behave in accordance with the model.