Using a sample of European venture capital (VC) investments, I study the relation between VC contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a write-off or an IPO. My findings are robust to controls for a variety of factors, including endogeneity and cases in which the VC preplans the exit at the time of contract choice. My findings are consistent with control-based theories of financial contracting, such as Aghion and Bolton (1992). The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.
{"title":"Contracts and Exits in Venture Capital Finance","authors":"Douglas J. Cumming","doi":"10.2139/ssrn.302695","DOIUrl":"https://doi.org/10.2139/ssrn.302695","url":null,"abstract":"Using a sample of European venture capital (VC) investments, I study the relation between VC contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a write-off or an IPO. My findings are robust to controls for a variety of factors, including endogeneity and cases in which the VC preplans the exit at the time of contract choice. My findings are consistent with control-based theories of financial contracting, such as Aghion and Bolton (1992). The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134271266","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Danish blue-chip index - the KFX Index - provides an interesting case for studying the effects of changes in a stock market index. This is because of the unique selection criterion used for the composition of the KFX Index. The criterion is pub- licly known and based on a combination of liquidity and market value of the stock. Consistent with the selection criterion, the stock price effects are generally small at the announcement of a change and at the later date when the change comes into effect. However, the deleted stocks experience an abnormal return averaging
{"title":"Price and Volume Effects Associated with Changes in the Danish Blue-Chip Index - the Kfx Index","authors":"K. Bechmann","doi":"10.2139/ssrn.302588","DOIUrl":"https://doi.org/10.2139/ssrn.302588","url":null,"abstract":"The Danish blue-chip index - the KFX Index - provides an interesting case for studying the effects of changes in a stock market index. This is because of the unique selection criterion used for the composition of the KFX Index. The criterion is pub- licly known and based on a combination of liquidity and market value of the stock. Consistent with the selection criterion, the stock price effects are generally small at the announcement of a change and at the later date when the change comes into effect. However, the deleted stocks experience an abnormal return averaging","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132222031","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We use probit modeling to forecast bear stock markets in the United States and in eight major foreign stock markets. In general, we find that the U.S. yield spread contains more important market-timing information than does the home-country yield spread for profitable market timing. At a 35% probability screen, our simulations show that the U.S. dollar (representative local currency) investor could earn a median compound annual return across eight foreign (non-U.S.) stock markets of 15.75% (17.67%) by following a market-timing strategy versus a median buy-and-hold return of 13.56% (16.55%). 2004 The Southern Finance Association and the Southwestern Finance Association.
{"title":"Market Timing of International Stock Markets Using the Yield Spread","authors":"Bruce G. Resnick, Wei Liu, Gary L. Shoesmith","doi":"10.2139/ssrn.314867","DOIUrl":"https://doi.org/10.2139/ssrn.314867","url":null,"abstract":"We use probit modeling to forecast bear stock markets in the United States and in eight major foreign stock markets. In general, we find that the U.S. yield spread contains more important market-timing information than does the home-country yield spread for profitable market timing. At a 35% probability screen, our simulations show that the U.S. dollar (representative local currency) investor could earn a median compound annual return across eight foreign (non-U.S.) stock markets of 15.75% (17.67%) by following a market-timing strategy versus a median buy-and-hold return of 13.56% (16.55%). 2004 The Southern Finance Association and the Southwestern Finance Association.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"168 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114576425","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper models the effect of bank competition and deposit insurance premia on the spread between lending and deposit rates. Low spreads do not always indicate bank efficiency in developing economies, but may be the result of high risk-taking. The optimal intermediation spread is characterized as the outcome of a deposit game played among banks with different asset size. This paper shows that imposing an upper and a lower limit on banks' spreads, and adjusting the deposit insurance premia when violation of these limits occurs, leads to a more stable, but relatively large intermediation cost. In developing economies, such an outcome would be considered as more desirable since it insulates the existing financial intermediaries and the investors against macroeconomic disturbances.
{"title":"Optimal Interest Margin, Deposit Insurance Premium and Bank Size","authors":"S. Ozyildirim","doi":"10.2139/ssrn.315341","DOIUrl":"https://doi.org/10.2139/ssrn.315341","url":null,"abstract":"This paper models the effect of bank competition and deposit insurance premia on the spread between lending and deposit rates. Low spreads do not always indicate bank efficiency in developing economies, but may be the result of high risk-taking. The optimal intermediation spread is characterized as the outcome of a deposit game played among banks with different asset size. This paper shows that imposing an upper and a lower limit on banks' spreads, and adjusting the deposit insurance premia when violation of these limits occurs, leads to a more stable, but relatively large intermediation cost. In developing economies, such an outcome would be considered as more desirable since it insulates the existing financial intermediaries and the investors against macroeconomic disturbances.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133388154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper analyses the corporate governance mechanisms of a sample of companies that have been acquired by friendly take-over and those of a matching control sample that have not. It also uses a holdout sample to assess the model's ability to correctly classify take-over candidates. The results show that friendly targets have lower Q ratios and are therefore poor performers. We also find that there are significant governance differences between the friendly take-over targets and the control sample. Friendly targets are more likely to have the same person acting as CEO and chair, have a higher proportion of new outside directors (those that have been on the board for less than four years) and have larger institutional shareholdings. The results suggest that distinguishing between friendly and hostile mergers may not be the most useful way of analysing merger behaviour given that friendly targets exhibit a number of characteristics consistent with the disciplinary aspects of the market for corporate control. The inclusion of governance characteristics also enables the model to differentiate between target and non-target companies when predicting acquisition probability. Using a holdout sample, the model correctly classified 57% of target companies.
{"title":"Friendly Takeovers in the UK: An Agency Analysis","authors":"C. Weir, D. Laing","doi":"10.2139/ssrn.314890","DOIUrl":"https://doi.org/10.2139/ssrn.314890","url":null,"abstract":"The paper analyses the corporate governance mechanisms of a sample of companies that have been acquired by friendly take-over and those of a matching control sample that have not. It also uses a holdout sample to assess the model's ability to correctly classify take-over candidates. The results show that friendly targets have lower Q ratios and are therefore poor performers. We also find that there are significant governance differences between the friendly take-over targets and the control sample. Friendly targets are more likely to have the same person acting as CEO and chair, have a higher proportion of new outside directors (those that have been on the board for less than four years) and have larger institutional shareholdings. The results suggest that distinguishing between friendly and hostile mergers may not be the most useful way of analysing merger behaviour given that friendly targets exhibit a number of characteristics consistent with the disciplinary aspects of the market for corporate control. The inclusion of governance characteristics also enables the model to differentiate between target and non-target companies when predicting acquisition probability. Using a holdout sample, the model correctly classified 57% of target companies.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114373091","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Campbell (1996) reports that, for most countries, the unconditional correlation between quarterly stock returns and consumption growth is small in magnitude and sometimes even negative. Using a bivariate GARCH framework, we examine whether the conditional correlation between stock returns and consumption is positive, even if the unconditional correlation is not. Consistent with this, we find strong evidence, both for U.S. monthly and most G7 quarterly data, that the conditional correlation between innovations in consumption growth and stock returns is positive and significant. Moreover, for six of the G7 countries, we reject the hypothesis that the correlation is constant. For three of the G7 countries (including the U.S.), the correlation is statistically higher for positive stock return shocks relative to negative stock return shocks. However, the correlation is unaffected by large movements in the stock returns for most countries. Our results support Campbell and Cochrane (1999b), who stress the importance of time-varying conditioning information for explaining asset prices. For policymakers concerned with the effect of the stock market on the real economy, our results suggest that the policy response may need to be stronger than normal when the stock market is performing better than expected. However, extreme market conditions, whether positive or negative, should not have additional effects on policy..
{"title":"New Evidence on the Time-Varying Correlation between Consumption Growth and Stock Returns for the G7 Countries","authors":"Lingjia Zhang, Asani Sarkar","doi":"10.2139/ssrn.314870","DOIUrl":"https://doi.org/10.2139/ssrn.314870","url":null,"abstract":"Campbell (1996) reports that, for most countries, the unconditional correlation between quarterly stock returns and consumption growth is small in magnitude and sometimes even negative. Using a bivariate GARCH framework, we examine whether the conditional correlation between stock returns and consumption is positive, even if the unconditional correlation is not. Consistent with this, we find strong evidence, both for U.S. monthly and most G7 quarterly data, that the conditional correlation between innovations in consumption growth and stock returns is positive and significant. Moreover, for six of the G7 countries, we reject the hypothesis that the correlation is constant. For three of the G7 countries (including the U.S.), the correlation is statistically higher for positive stock return shocks relative to negative stock return shocks. However, the correlation is unaffected by large movements in the stock returns for most countries. Our results support Campbell and Cochrane (1999b), who stress the importance of time-varying conditioning information for explaining asset prices. For policymakers concerned with the effect of the stock market on the real economy, our results suggest that the policy response may need to be stronger than normal when the stock market is performing better than expected. However, extreme market conditions, whether positive or negative, should not have additional effects on policy..","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123135955","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper tests the hypothesis that some participants in index futures markets engage in feedback trading. The analysis is based on a modified dynamic Capital Asset Pricing Model that assumes two types of investors: i) expected utility maximizers, and ii) positive feedback traders who sell during market declines and buy during market advances. According to the model, the actions of the latter group, if present, would induce negative time varying autocorrelation. The model is tested using data from four popular international stock index futures contracts. There is some evidence of time-varying negative autocorrelation, consistent with the notion that some participants are feedback traders. However, other important aspects of the model are not supported by the evidence.
{"title":"Testing for Feedback Trading in Index Futures: A Dynamic CAPM Approach","authors":"G. Koutmos","doi":"10.2139/ssrn.314509","DOIUrl":"https://doi.org/10.2139/ssrn.314509","url":null,"abstract":"This paper tests the hypothesis that some participants in index futures markets engage in feedback trading. The analysis is based on a modified dynamic Capital Asset Pricing Model that assumes two types of investors: i) expected utility maximizers, and ii) positive feedback traders who sell during market declines and buy during market advances. According to the model, the actions of the latter group, if present, would induce negative time varying autocorrelation. The model is tested using data from four popular international stock index futures contracts. There is some evidence of time-varying negative autocorrelation, consistent with the notion that some participants are feedback traders. However, other important aspects of the model are not supported by the evidence.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130288308","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We use contingent claims analysis to evaluate portfolios of vulnerable private loan guarantees and to investigate their risk diversification properties. We find that for plausible baseline values of the parameters, the diversifiable credit risk can be eliminated in a portfolio of ten insured firms. We also show that further diversification can be achieved by an appropriate choice of insured firms' risk postures and of correlations between them and the guarantor. Our results suggest that, for high leverage cases, guarantors can do better through size portfolio diversification than by seeking cross-sector diversification.
{"title":"An Analysis of Private Loan Guarantee Portfolios","authors":"M. Gendron, Van Son Lai, Issouf Soumaré","doi":"10.2139/ssrn.314386","DOIUrl":"https://doi.org/10.2139/ssrn.314386","url":null,"abstract":"We use contingent claims analysis to evaluate portfolios of vulnerable private loan guarantees and to investigate their risk diversification properties. We find that for plausible baseline values of the parameters, the diversifiable credit risk can be eliminated in a portfolio of ten insured firms. We also show that further diversification can be achieved by an appropriate choice of insured firms' risk postures and of correlations between them and the guarantor. Our results suggest that, for high leverage cases, guarantors can do better through size portfolio diversification than by seeking cross-sector diversification.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"301 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115899369","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we consider the impact of the introduction of LIFFE CONNECT on the lead-lag relationship between the FTSE100 index and its futures. In general, the results of this study suggest that the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets and lessens the existence of a lead-lag relationship. This evidence differs to that of the previous literature which has generally found a strengthening of the lead of the futures market to the cash market. The reason for this difference in results is most likely a reflection of the fact that the cash market was generally floor traded in the previous literature, while in this study the FTSE100 was screen traded.
{"title":"The Impact of Screen Trading on the Link between Stock Index and Stock Index Futures Prices: Evidence from UK Markets","authors":"A. Frino, M. Mckenzie","doi":"10.2139/ssrn.314398","DOIUrl":"https://doi.org/10.2139/ssrn.314398","url":null,"abstract":"In this paper, we consider the impact of the introduction of LIFFE CONNECT on the lead-lag relationship between the FTSE100 index and its futures. In general, the results of this study suggest that the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets and lessens the existence of a lead-lag relationship. This evidence differs to that of the previous literature which has generally found a strengthening of the lead of the futures market to the cash market. The reason for this difference in results is most likely a reflection of the fact that the cash market was generally floor traded in the previous literature, while in this study the FTSE100 was screen traded.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129168187","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There has been much debate about mutual fund performance - especially about the persistence of excess returns. Prior research on persistence in performance has examined samples of mutual funds in various ways. This study examines the returns on a sample of growth equity mutual funds over the period 1988-1996. The determination of winning/losing is based on a fund outperforming/underperforming the S&P 500 as the market benchmark. The sample of mutual funds examined over the study period shows both significant positive performance as well as persistence in performance. Persistence in positive performance outweighs persistence in negative performance.
{"title":"Persistence in Mutual Fund Returns Revisited: An Examination of Growth Mutual Funds from 1988-1996","authors":"Amitabh S. Dutta","doi":"10.2139/ssrn.313973","DOIUrl":"https://doi.org/10.2139/ssrn.313973","url":null,"abstract":"There has been much debate about mutual fund performance - especially about the persistence of excess returns. Prior research on persistence in performance has examined samples of mutual funds in various ways. This study examines the returns on a sample of growth equity mutual funds over the period 1988-1996. The determination of winning/losing is based on a fund outperforming/underperforming the S&P 500 as the market benchmark. The sample of mutual funds examined over the study period shows both significant positive performance as well as persistence in performance. Persistence in positive performance outweighs persistence in negative performance.","PeriodicalId":113051,"journal":{"name":"EFMA 2002 London Meetings (Archive)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120953727","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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