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Analyst coverage and earnings management
Fang (Frank) Yu
Abstract:What is the role of information intermediaries in corporate governance? This paper examines equity analysts’ influence
on managers’ earnings management decisions. Do analysts serve as external monitors to managers, or do they put
excessive pressure on managers? Using multiple measures of earnings management, I find that firms followed by more
analysts manage their earnings less. To address the potential endogeneity problem of analyst coverage, I use two
instrumental variables based on change in broker size and on firm’s inclusion in the Standard & Poor’s 500 index, and I
find that the results are robust. Finally, given the number of covering analysts, analysts from top brokers and more
experienced analysts have stronger effects against earnings management.
Trading imbalances, predictable reversals,and cross-stock price pressure
Sandro C. Andradea, Charles Changb, Mark S. Seasholes
Abstract
We test the implications of a multi-asset equilibrium model in which a finite number of risk-averse liquidity providers
accommodate non-informational trading imbalances. These imbalances generate predictable reversals in stock returns. An
imbalance in one stock also affects the prices of other stocks. The magnitude of the cross-stock price pressure depends on
the correlations of the stocks’ underlying cash flows. The model implies that non-informational trading increases the
volatility of stock returns. We confirm the model’s implications using data from the Taiwan Stock Exchange.
Decomposing swap spreads Peter Feldhu¨ tter, David Lando
Abstract
We analyze a six-factor model for Treasury bonds, corporate bonds, and swap rates and decompose swap spreads into
three components: a convenience yield from holding Treasuries, a credit risk element from the underlying LIBOR rate, and
a factor specific to the swap market. The convenience yield is by far the largest component of spreads. There is a discernible
contribution from credit risk as well as from a swap-specific factor with higher variability which in certain periods is related
to hedging activity in the mortgage-backed security market. The model also sheds light on the relation between AA hazard
rates and the spread between LIBOR rates and General Collateral repo rates and on the level of the riskless rate compared
to swap and Treasury rates.
The consequences to managers for financial misrepresentation$
Jonathan M. Karpoffa,, D. Scott Leeb, Gerald S. Martin
Abstract
We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange
Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1,
1978 through September 30, 2006. Fully 93% lose their jobs by the end of the regulatory enforcement period. Most are
explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the
firm’s governance. Culpable managers also bear substantial financial losses through restrictions on their future
employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28%) face criminal charges and penalties,
including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial
misconduct face significant disciplinary action..
Ex-dividend day trading: Who, how, and why? Evidence from the Finnish market$
Elias Rantapuska
Abstract
This study examines the ex-dividend day trading behavior of all investors in the Finnish stock market. Consistent with
dynamic dividend clientele theories, investors with a preference for dividend income buy shares cum-dividend and sell
ex-dividend; the reverse is true for investors with the opposite preference. Investors also engage in overnight arbitrage,
earning on average a 2% overnight return on their invested capital. Trades at the investor-level reveal that idiosyncratic
risk is an important determinant in the choice of stock for short-term ex-day trading. Furthermore, transaction costs and
dividend yield jointly determine whether the volume of short-term trading activity is nonzero
Latent liquidity: A new measure of liquidity, with an application to corporate bonds Sriketan Mahantia, Amrut Nashikkarc, Marti Subrahmanyamc,,
George Chackod, Gaurav Mallik
Abstract
We present a new measure of liquidity known as ‘‘latent liquidity’’ and apply it to a unique corporate bond database.
Latent liquidity is defined as the weighted average turnover of investors who hold a bond, in which the weights are the
fractional investor holdings. It can be used to measure liquidity in markets with sparse transactions data. For bonds that
trade frequently, our measure has predictive power for both transaction costs and the price impact of trading, over and
above trading activity and bond-specific characteristics thought to be related to liquidity. Additionally, this measure
exhibits relationships with bond characteristics similar to those of other trade-based measures
Dumb money: Mutual fund flows and the cross-section of stock returns
Andrea Frazzinia,, Owen A. Lamont
Abstract
We use mutual fund flows as a measure of individual investor sentiment for different stocks, and find that high sentiment
predicts low future returns. Fund flows are dumb money–by reallocating across different mutual funds, retail investors
reduce their wealth in the long run. This dumb money effect is related to the value effect: high sentiment stocks tend to be
growth stocks. High sentiment also is associated with high corporate issuance, interpretable as companies increasing the
supply of shares in response to investor demand.
Decomposing swap spreads
Peter Feldhu¨ tter, David Lando
Abstract
We analyze a six-factor model for Treasury bonds, corporate bonds, and swap rates and decompose swap spreads into
three components: a convenience yield from holding Treasuries, a credit risk element from the underlying LIBOR rate, and
a factor specific to the swap market. The convenience yield is by far the largest component of spreads. There is a discernible
contribution from credit risk as well as from a swap-specific factor with higher variability which in certain periods is related
to hedging activity in the mortgage-backed security market. The model also sheds light on the relation between AA hazard
rates and the spread between LIBOR rates and General Collateral repo rates and on the level of the riskless rate compared
to swap and Treasury rates.
Financial expertise of directors
A. Burak Gu¨ nera, Ulrike Malmendierb,, Geoffrey Tate
Abstract
We analyze how directors with financial expertise affect corporate decisions. Using a novel panel data set, we find that
financial experts exert significant influence, though not necessarily in the interest of shareholders. When commercial
bankers join boards, external funding increases and investment-cash flow sensitivity decreases. However, the increased
financing flows to firms with good credit but poor investment opportunities. Similarly, investment bankers on boards are
associated with larger bond issues but worse acquisitions. We find little evidence that financial experts affect compensation
policy. The results suggest that increasing financial expertise on boards may not benefit shareholders if conflicting interests
(e.g., bank profits) are neglected.
[此贴子已经被作者于2008-6-29 22:50:31编辑过]
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