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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Bank Performance around the Introduction of a Section 20 Subsidiary
Published: 12/17/2002 | DOI: 10.1111/1540-6261.00430
Marcia Millon Cornett, Evren Ors, Hassan Tehranian
As of 1987, commercial banks in the United States were allowed to establish Section 20 subsidiaries to conduct investment‐banking activities. A concern of regulators was that these activities would result in a decrease in performance of commercial banks relative to the risk being undertaken. This paper examines the performance of commercial banks around the establishment of a Section 20 subsidiary. We find that Section 20 activities undertaken by banks result in increased industry‐adjusted operating cash flow return on assets, due mainly to revenues from noncommercial‐banking activities. Further, risk measures for the sample banks do not change significantly.
An Examination of the Impact of the Garn‐St. Germain Depository Institutions Act of 1982 on Commercial Banks and Savings and Loans
Published: 03/01/1990 | DOI: 10.1111/j.1540-6261.1990.tb05082.x
MARCIA MILLON CORNETT, HASSAN TEHRANIAN
This paper evaluates the effects of events leading to the passage of the Garn‐St. Germain Depository Institutions Act of 1982. The evidence suggests that the call for reform by President Reagan's Housing Commission and the Senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks. Stockholders of small S&Ls and banks, on the other hand, generally experienced negative abnormal returns. Furthermore, when hopes of passage of the Act faded, significant negative (positive) abnormal returns were experienced by stockholders of large (small) S&Ls and banks.
Are Financial Markets Overly Optimistic about the Prospects of Firms That Issue Equity? Evidence from Voluntary versus Involuntary Equity Issuances by Banks
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00085
Marcia Millon Cornett, Hamid Mehran, Hassan Tehranian
This paper examines firm performance around announcements of common stock issues. We study the banking industry in which some stock issues are made voluntarily by managers, and other issues are involuntary. We find that banks that voluntarily issue common stock experience a significant drop in the matched adjusted operating performance following the issue, a significant drop in benchmark firms' adjusted stock prices following the issue, and systematically negative market reactions to post‐issue quarterly earnings announcements. Banks that issue common stock involuntarily experience values for these measures that are not significantly different from those of the benchmark firm(s).
The Effect of Long‐Term Performance Plans on Corporate Sell‐Off‐Induced Abnormal Returns
Published: 09/01/1987 | DOI: 10.1111/j.1540-6261.1987.tb03920.x
HASSAN TEHRANIAN, NICKOLAOS G. TRAVLOS, JAMES F. WAEGELEIN
This study examines the association between long‐term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell‐off proposals. The results indicate that divesting companies with long‐term performance plans experience a more favorable stock market reaction at the announcement of sell‐off proposals relative to firms without long‐term performance plans. The findings imply that long‐term performance plans serve as an effective mechanism to motivate managers to make better decisions.