The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in the most recent decade. The disappearance is associated with the changing market environment – increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the changing market environment, firms become less opportunistic in stock repurchases and offerings. Recent events are motivated more for business operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the post-event abnormal returns. Our evidence on the recent events contrasts with the findings of earlier studies and sheds light on how the changing market environment affect both asset pricing and corporate behavior.
{"title":"The Persistence of Long-Run Abnormal Stock Returns Following Stock Repurchases and Offerings","authors":"Fangjian Fu, Sheng Huang","doi":"10.2139/ssrn.1936187","DOIUrl":"https://doi.org/10.2139/ssrn.1936187","url":null,"abstract":"The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in the most recent decade. The disappearance is associated with the changing market environment – increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the changing market environment, firms become less opportunistic in stock repurchases and offerings. Recent events are motivated more for business operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the post-event abnormal returns. Our evidence on the recent events contrasts with the findings of earlier studies and sheds light on how the changing market environment affect both asset pricing and corporate behavior.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124552866","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 internationalization of R&D activity by multinational enterprises (MNEs) is increasing, with a recent big push towards emerging economies. Understanding how MNEs organize collaborative R&D across geographies is therefore an important area of scholarship. However, little attention has been paid towards understanding the factors that influence the division of innovative labor within an MNE across geographies – the internal division of innovative labor. Drawing on the literature that shows that strong protection for intellectual property (IP) is important for the efficient division of innovative labor between firms, we argue and show that differences in effectiveness of IP protection between international locations significantly influences the internal division of innovative labor, especially for R&D aimed at the host market when compared to R&D aimed at the home market.
{"title":"Right Person at the Right Place: How IPR at the Host Location Influences the Internal Division of Innovative Labor in Multinational Enterprises","authors":"Anand Nandkumar, K. Srikanth","doi":"10.2139/ssrn.2499158","DOIUrl":"https://doi.org/10.2139/ssrn.2499158","url":null,"abstract":"The internationalization of R&D activity by multinational enterprises (MNEs) is increasing, with a recent big push towards emerging economies. Understanding how MNEs organize collaborative R&D across geographies is therefore an important area of scholarship. However, little attention has been paid towards understanding the factors that influence the division of innovative labor within an MNE across geographies – the internal division of innovative labor. Drawing on the literature that shows that strong protection for intellectual property (IP) is important for the efficient division of innovative labor between firms, we argue and show that differences in effectiveness of IP protection between international locations significantly influences the internal division of innovative labor, especially for R&D aimed at the host market when compared to R&D aimed at the home market.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"129 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121269065","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}
Resource pooling strategies have been widely used in industry to match supply with demand. However, effective implementation of these strategies can be challenging. Firms need to integrate the heterogeneous service level requirements of different customers into the pooling model and allocate the resources (inventory or capacity) appropriately in the most effective manner. The traditional analysis of inventory pooling, for instance, considers the performance metric in a centralized system and does not address the associated issue of inventory allocation. Using Blackwell’s Approachability Theorem, we derive a set of necessary and sufficient conditions to relate the fill rate requirement of each customer to the resources needed in the system. This provides a new approach to studying the value of resource pooling in a system with differentiated service requirements. Furthermore, we show that with “allocation flexibility,” the amount of safety stock needed in a system with independent and identically distribut...
{"title":"Resource Pooling and Allocation Policies to Deliver Differentiated Service","authors":"Yuanguang Zhong, Zhichao Zheng, M. Chou, C. Teo","doi":"10.1287/mnsc.2016.2674","DOIUrl":"https://doi.org/10.1287/mnsc.2016.2674","url":null,"abstract":"Resource pooling strategies have been widely used in industry to match supply with demand. However, effective implementation of these strategies can be challenging. Firms need to integrate the heterogeneous service level requirements of different customers into the pooling model and allocate the resources (inventory or capacity) appropriately in the most effective manner. The traditional analysis of inventory pooling, for instance, considers the performance metric in a centralized system and does not address the associated issue of inventory allocation. Using Blackwell’s Approachability Theorem, we derive a set of necessary and sufficient conditions to relate the fill rate requirement of each customer to the resources needed in the system. This provides a new approach to studying the value of resource pooling in a system with differentiated service requirements. Furthermore, we show that with “allocation flexibility,” the amount of safety stock needed in a system with independent and identically distribut...","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123811249","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 coordination of specialists’ search efforts is one of the principal purposes of organization. Integration mechanisms enable joint search by allowing interdependent others to form shared mental models of the joint task. Whereas prior theory has concentrated on how integration mechanisms impact coordination among multiple specialists, they have not explored how integration impacts search. We call problems that emphasize both search and coordination as “problems of coordinated exploration”. Using a computational model, we find that coordinated exploration is not simple scaling up of individual search. Coordinated exploration is subject to two problems – mutual-confusion and joint-myopia – that arise only when epistemic interdependence is coupled with uncertainty. Agents’ attempts to reduce mutual-confusion automatically increases joint-myopia and vice-versa. Organizing coordinated exploration requires that agents’ mental model alignment balances the need for both coordination and search in order to avoid these two pathologies in joint search.
{"title":"Coordinated Exploration: Organizing Search by Multiple Specialists to Overcome Mutual Confusion and Joint Myopia","authors":"T. Knudsen, K. Srikanth","doi":"10.2139/ssrn.1650025","DOIUrl":"https://doi.org/10.2139/ssrn.1650025","url":null,"abstract":"The coordination of specialists’ search efforts is one of the principal purposes of organization. Integration mechanisms enable joint search by allowing interdependent others to form shared mental models of the joint task. Whereas prior theory has concentrated on how integration mechanisms impact coordination among multiple specialists, they have not explored how integration impacts search. We call problems that emphasize both search and coordination as “problems of coordinated exploration”. Using a computational model, we find that coordinated exploration is not simple scaling up of individual search. Coordinated exploration is subject to two problems – mutual-confusion and joint-myopia – that arise only when epistemic interdependence is coupled with uncertainty. Agents’ attempts to reduce mutual-confusion automatically increases joint-myopia and vice-versa. Organizing coordinated exploration requires that agents’ mental model alignment balances the need for both coordination and search in order to avoid these two pathologies in joint search.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"119 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133119270","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}
Pub Date : 2013-01-26DOI: 10.1016/J.EJOR.2013.07.009
Xiaobo Li, K. Natarajan, C. Teo, Zhichao Zheng
{"title":"Distributionally Robust Mixed Integer Linear Programs: Persistency Models with Applications","authors":"Xiaobo Li, K. Natarajan, C. Teo, Zhichao Zheng","doi":"10.1016/J.EJOR.2013.07.009","DOIUrl":"https://doi.org/10.1016/J.EJOR.2013.07.009","url":null,"abstract":"","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120292472","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}
David K. Ding, Christo Ferreira, Udomsak Wongchoti
We evidence a non-linear relationship between firm value and corporate social responsibility, adding to the mixed evidence on this relationship. We show that corporate social responsibility exhibits a dynamic process, which is largely dependent on a firm’s industry, relative standing amongst peers and the distinction between responsible and irresponsible behavior. Surprisingly, we find that responsible behavior could sometimes destroy firm value, while irresponsible behavior could sometimes increase firm value. Endogeneity is mitigated through a novel process that allows us to keep constant the endogeneity inherent in this field, examining corporate social responsibility’s effect on firm value separately.
{"title":"Aiming for Average: The Effect of Peer Standing on the Dynamic Process of Corporate Social Responsibility","authors":"David K. Ding, Christo Ferreira, Udomsak Wongchoti","doi":"10.2139/ssrn.1971484","DOIUrl":"https://doi.org/10.2139/ssrn.1971484","url":null,"abstract":"We evidence a non-linear relationship between firm value and corporate social responsibility, adding to the mixed evidence on this relationship. We show that corporate social responsibility exhibits a dynamic process, which is largely dependent on a firm’s industry, relative standing amongst peers and the distinction between responsible and irresponsible behavior. Surprisingly, we find that responsible behavior could sometimes destroy firm value, while irresponsible behavior could sometimes increase firm value. Endogeneity is mitigated through a novel process that allows us to keep constant the endogeneity inherent in this field, examining corporate social responsibility’s effect on firm value separately.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121350014","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}
Michael J. Barclay, Fangjian Fu, Clifford W. Smith
Current theories of capital structure have difficulty explaining the aspects of financing behavior we document. In contrast to the tradeoff theory, seasoned equity offers frequently move firms away from their target leverage ratios. At odds with the pecking-order theory, SEO firms typically are financially healthy companies with low leverage, unused debt capacity and substantial cash balances. Inconsistent with the market-timing theory, SEOs appear to be driven by capital requirements associated with large investment projects rather than by market-timing considerations. Moreover, firms issue debt following SEOs, not only to finance investment, but to increase leverage toward its target level. Each of these theories assumes some degree of myopia among financial managers. We propose that CFOs manage their capital structures rationally rather than myopically. They consider the firm’s current and target leverage, investment opportunities and long-term capital requirements, as well as the costs and benefits of alternative sequences of financing transactions. This framework, which we term rational financial management, better explains the financing and leverage behavior of SEO firms.
{"title":"Rational Financial Management: Evidence from Seasoned Equity Offerings","authors":"Michael J. Barclay, Fangjian Fu, Clifford W. Smith","doi":"10.2139/ssrn.1099850","DOIUrl":"https://doi.org/10.2139/ssrn.1099850","url":null,"abstract":"Current theories of capital structure have difficulty explaining the aspects of financing behavior we document. In contrast to the tradeoff theory, seasoned equity offers frequently move firms away from their target leverage ratios. At odds with the pecking-order theory, SEO firms typically are financially healthy companies with low leverage, unused debt capacity and substantial cash balances. Inconsistent with the market-timing theory, SEOs appear to be driven by capital requirements associated with large investment projects rather than by market-timing considerations. Moreover, firms issue debt following SEOs, not only to finance investment, but to increase leverage toward its target level. Each of these theories assumes some degree of myopia among financial managers. We propose that CFOs manage their capital structures rationally rather than myopically. They consider the firm’s current and target leverage, investment opportunities and long-term capital requirements, as well as the costs and benefits of alternative sequences of financing transactions. This framework, which we term rational financial management, better explains the financing and leverage behavior of SEO firms.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116962158","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}
After executing option orders, options market makers turn to the stock market to hedge away the underlying stock exposure. As a result, the stock exposure imbalance in option transactions translates into an imbalance in stock transactions. This paper decomposes the total stock order imbalance into an imbalance induced by option transactions and an imbalance independent of options. The analysis shows that the option-induced imbalance significantly predicts future stock returns in the cross section controlling for the past stock and options returns, but the imbalance independent of options has only a transitory price impact. Further investigation suggests that options order flow contains important information about the underlying stock value.
{"title":"Does Option Trading Convey Stock Price Information?","authors":"Jianfeng Hu","doi":"10.2139/ssrn.1970702","DOIUrl":"https://doi.org/10.2139/ssrn.1970702","url":null,"abstract":"After executing option orders, options market makers turn to the stock market to hedge away the underlying stock exposure. As a result, the stock exposure imbalance in option transactions translates into an imbalance in stock transactions. This paper decomposes the total stock order imbalance into an imbalance induced by option transactions and an imbalance independent of options. The analysis shows that the option-induced imbalance significantly predicts future stock returns in the cross section controlling for the past stock and options returns, but the imbalance independent of options has only a transitory price impact. Further investigation suggests that options order flow contains important information about the underlying stock value.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115658451","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}
Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Industry expertise is an important aspect of sell-side research. We explore this aspect using a novel dataset of industry recommendations, which are often issued by strategy analysts. We study sell-side analysts' ability to rank industries relative to each other (across-industry expertise), and how it relates to analysts' ability to rank firms in a particular industry (within-industry expertise). We find that analysts express more optimism towards industries with higher levels of investment, past profitability, and past returns. Analysts exhibit across-industry expertise, as portfolios based on industry recommendations generate abnormal returns over both short and long horizons, beyond what would be explained by industry momentum. Additionally, industry recommendations contain information, which is orthogonal to the information revealed in firm recommendations, and more so for brokers who benchmark their firm recommendations to industry peers. Consequently, the investment value of sell-side analysts' recommendations is enhanced when both dimensions of industry expertise are utilized by considering industry and firm recommendations in combination.
{"title":"Analysts’ Industry Expertise","authors":"Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach","doi":"10.2139/ssrn.1361620","DOIUrl":"https://doi.org/10.2139/ssrn.1361620","url":null,"abstract":"Industry expertise is an important aspect of sell-side research. We explore this aspect using a novel dataset of industry recommendations, which are often issued by strategy analysts. We study sell-side analysts' ability to rank industries relative to each other (across-industry expertise), and how it relates to analysts' ability to rank firms in a particular industry (within-industry expertise). We find that analysts express more optimism towards industries with higher levels of investment, past profitability, and past returns. Analysts exhibit across-industry expertise, as portfolios based on industry recommendations generate abnormal returns over both short and long horizons, beyond what would be explained by industry momentum. Additionally, industry recommendations contain information, which is orthogonal to the information revealed in firm recommendations, and more so for brokers who benchmark their firm recommendations to industry peers. Consequently, the investment value of sell-side analysts' recommendations is enhanced when both dimensions of industry expertise are utilized by considering industry and firm recommendations in combination.","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134348969","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}
Probability Distributions Conditional Probability Laws of Probability Theory of Risk and Utility State Price and Risk-Neutral Probability Single Period Asset Pricing Models Stochastic Processes and Martingales Brownian Motion and Technical Trading Dynamic Programming and Multi-period Asset Pricing Continuous-Time Optimization and Asset Pricing Continuous-Time Option Pricing Hedging and More Option Pricing Implied Risk-Neutral Moments and Distributions Theory of Markov Chains and Credit Markets Interest Rate Modelling and Derivatives
{"title":"Probability and Finance Theory","authors":"K. Lim","doi":"10.1142/7781","DOIUrl":"https://doi.org/10.1142/7781","url":null,"abstract":"Probability Distributions Conditional Probability Laws of Probability Theory of Risk and Utility State Price and Risk-Neutral Probability Single Period Asset Pricing Models Stochastic Processes and Martingales Brownian Motion and Technical Trading Dynamic Programming and Multi-period Asset Pricing Continuous-Time Optimization and Asset Pricing Continuous-Time Option Pricing Hedging and More Option Pricing Implied Risk-Neutral Moments and Distributions Theory of Markov Chains and Credit Markets Interest Rate Modelling and Derivatives","PeriodicalId":151026,"journal":{"name":"Singapore Management University Lee Kong Chian School of Business Research Paper Series","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131889020","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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