Suchergebnisse

AbstractIn this paper the interest rate sensitivity of common stock returns of financial firms is re‐examined. Considered here are (1) current, anticipated, and unanticipated changes in interest rates; (2) depository and nondepository firms; and (3) three different‐maturity interest rate indices. Results lend strong support for a negative effect of both current and unanticipated interest rate changes. Although some exceptions are observed, stock returns of most subsectors of both financial and nonfinancial firms are not sensitive to anticipated interest rate changes. The findings of this study are robust to the choice of a particular model of interest rate expectations.

This paper examines the effect of R&D investments on the market value of firms in the U.S., Germany, and Japan. Specially, this paper investigates the empirical validity of the widely‐held economic views that suggest that the stock‐market oriented U.S. financial system leads to more corporate myopia and hence to less longer‐term investments such as R&D than the bank‐oriented German and Japanese firms. Findings include that U.S. firms invest in R&D as much as their counterparts in Japan and Germany; the market places a significant and positive value on R&D investments by U.S. firms, though lower than German and Japanese firms; and there are notable differences among the three nations with respect to several other variables. The overall evidence lends little support to the corporate myopia view on U.S. firms.

AbstractWe examine the empirical relation between firm characteristics and the likelihood of choosing a restructuring choice between two types of leveraged buyouts: a whole‐company leveraged buyout (WLBO) and a divisional leveraged buyout (DLBO). Our findings suggest that firm characteristics such as volatility of cash flow and growth potential play an important role in determining a firm's restructuring choice between a WLBO and a DLBO. In particular, firms with greater volatility of cash flow and/or greater future growth potential are more likely to adopt a DLBO than a WLBO as their restructuring choice. These results are consistent with the notion that although low‐growth, high‐cash‐flow firms would create the most value for stockholders by paying out cash and tying future cash flows to the firm's debt service through a WLBO, high‐growth, low‐cash‐flow firms would be better off by selling assets if those assets would be better managed under a DLBO.

AbstractTwo types of defensive scheme—leveraged buyout (LBO) and leveraged recapitalization (LR)—are examined. In particular, this article examines (1) whether the two similar defensive tactics affect stockholder returns differently and (2) what firm attributes are associated with stockholder gains in LBO and LR announcements. This study finds that stocks of both LBO and LR firms, on average, exhibit significant positive abnormal returns during the announcement period, but that the latter experience substantially smaller returns than the former. This study further finds that while mitigation of agency problems associated with a firm's free cash flow is present for both LR and LBO firms, it is more pronounced for the LBO firms. These results provide evidence that a firm with higher free cash flow could benefit a greater reduction of agency costs by going private through a LBO plan than by remaining public through a LR plan.

AbstractWe find that Hofstede's cultural dimensions—uncertainty avoidance, masculinity, and long‐term orientation—remain significant in the determination of firms' dividend policies, even after controlling for corporate governance. We also show that this association varies with the strength of corporate governance, measured by the degree of investor protection. Hence, national culture and investor protection independently affect firms' dividend payouts but also interact with each other, such that strong investor protection induces higher dividend payouts in high uncertainty avoiding and/or highly masculine cultures. Our results provide strong evidence that cultural differences matter and offer additional power in explaining variations in dividend policies.

AbstractEvent risk covenants (ERCs) became popular as a bondholder protection measure during the height of restructuring activities in the 1980s. We investigate the empirical relation between firm characteristics and the likelihood of ERCs in bond indentures. In particular, we examine whether a firm's agency costs of debt, financial distress costs, and/or takeover potential influence its decision to include ERCs. Employing bonds with and without ERCs issued during 1986–90, we provide evidence that the likelihood a firm will include ERCs is positively related to the firm's agency costs of debt and to its potential for takeover. The results, however, do not support the financial distress costs hypothesis.

We examine whether firms' multinationality leads to better performance and what the role of R&D investment is in the multinationality performance linkage. Unlike the previous studies, we employ both accounting‐ and market‐based measures of firm performance for a large sample of U.S. manufacturing firms. Our results show that the empirical relation between multinationality and performance is not monotonic but varies with the phase of a firm's multinationality, starting with a negative relation initially, followed by a positive one, and then again a negative one. This horizontal S‐shaped curvilinear relation of multinationality is more pronounced for the market‐based performance measure and is supportive of the three‐stage theory of internationalization. We also find that a firm's multinationality is related to greater firm performance when the firm possesses R&D investment, and that the effect of R&D increases with the extent of a firm's multinationality. These results lend strong support for the Internalization theory and the resource‐based view of firms' international expansion. Our results are robust to different model specifications with an alternative measure of multinationality.

AbstractWe test whether foreign investors price foreign exchange risk differently from local investors. Drawing from the closed‐end country fund literature, we argue that both differential access to information by foreign versus local investors and different sources of exchange risk that investors face (economic or translation exposure) will lead to different pricing of the exchange risk associated with American Depositary Receipt (ADR) investments. We apply a two‐step method to country portfolios of ADRs of Australia, France, Japan, and the United Kingdom traded on the New York Stock Exchange. Our results show that foreign investors generally price exchange risk differently from local investors, and that the source and magnitude of differences in exchange risk pricing vary significantly across countries. Although significant differences in pricing exchange risk between foreign and local investors are observed for Australia, France, and Japan, no such pricing difference is noticed for the United Kingdom. Furthermore, the pricing differences observed for Australian and French ADRs are mainly attributed to the exchange risk of underlying share returns (economic exposure), whereas the pricing differences for Japanese ADRs are mainly attributed to the exchange risk associated with currency translation (translation exposure). We offer some explanations for our findings.

In this paper, we develop an international joint venture model and examine the equity ownership determination of Korean outward FDIs, one of the major developing economies (DEs), into both developed countries (DCs) and other DEs. We do this by explicitly considering the cost of technology leakage and the potential profits from FDI projects. Our results show that the relation between equity ownership and technology level depends on both the host country and industry sector. Regarding the host country, this relation is positive for FDIs into DEs but negative for FDIs into DCs. Regarding industry, this relation is positive and insignificant for the manufacturing sector but negative and significant for the nonmanufacturing sector. Combined together, these results indicate that Korean firms benefit most from competitive advantages through their FDIs into the manufacturing sector of DEs. In contrast, such competitive advantages of Korean firms diminish in their FDIs into DCs regardless of the industry sector.