Capital acquisition has received increased attention as publicly-traded firms endured and are now slowly emerging from the financial crisis. Along those lines, we examine ten years of shelf offerings, from 1996 to 2005, as they offer a unique manner with which firms can enhance their capital positions while hedging short and intermediate-term movements in the equity markets. We find some firms rely on the efficiencies and flexibility afforded by shelf registrations (Securities and Exchange Commission Rule 415). We also document the increased utilization of the shelf procedure, which gained significant momentum over the period of this study. This pattern continued despite the lack of underwriter certification that attaches to traditional registered equity issues. Firms were likely attracted to the lower costs of shelf offerings and to the ability to issue securities as more favorable market environments developed during the two-year shelf “window” allowed during the period studied
{"title":"The Significance and Certification of Shelf Registrations","authors":"Clay M. Moffett, J. Graham, William H. Sackley","doi":"10.2139/ssrn.1919027","DOIUrl":"https://doi.org/10.2139/ssrn.1919027","url":null,"abstract":"Capital acquisition has received increased attention as publicly-traded firms endured and are now slowly emerging from the financial crisis. Along those lines, we examine ten years of shelf offerings, from 1996 to 2005, as they offer a unique manner with which firms can enhance their capital positions while hedging short and intermediate-term movements in the equity markets. We find some firms rely on the efficiencies and flexibility afforded by shelf registrations (Securities and Exchange Commission Rule 415). We also document the increased utilization of the shelf procedure, which gained significant momentum over the period of this study. This pattern continued despite the lack of underwriter certification that attaches to traditional registered equity issues. Firms were likely attracted to the lower costs of shelf offerings and to the ability to issue securities as more favorable market environments developed during the two-year shelf “window” allowed during the period studied","PeriodicalId":307682,"journal":{"name":"Midwest Finance Association 2012 Annual Meeting (Archive)","volume":"131 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122337959","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 solve a firm’s investment problem when there is uncertainty about the growth rate of the project value and the investment cost, and the firm is ambiguity averse. We use a robust method to take this into account and provide explicit solution to the value of the option to invest. Ambiguity aversion decreases the investment threshold and volatility increases the impact of ambiguity aversion. We show that correlation between the project and the investment costs have a significant effect to ambiguity. Hence, ambiguity aversion is an important aspect to take into account when the firm considers its investment strategy.
{"title":"Robust Investment Decisions and the Value of Waiting to Invest","authors":"Christian Riis Flor, Søren Hesel","doi":"10.2139/ssrn.1928403","DOIUrl":"https://doi.org/10.2139/ssrn.1928403","url":null,"abstract":"We solve a firm’s investment problem when there is uncertainty about the growth rate of the project value and the investment cost, and the firm is ambiguity averse. We use a robust method to take this into account and provide explicit solution to the value of the option to invest. Ambiguity aversion decreases the investment threshold and volatility increases the impact of ambiguity aversion. We show that correlation between the project and the investment costs have a significant effect to ambiguity. Hence, ambiguity aversion is an important aspect to take into account when the firm considers its investment strategy.","PeriodicalId":307682,"journal":{"name":"Midwest Finance Association 2012 Annual Meeting (Archive)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128402996","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 investigate liquidity shocks and shocks to fundamentals during financial crises at commercial banks, investment banks, and hedge funds. Liquidity shock amplification models assume that widespread funding problems cause fire sales. We find that most banks do not experience funding declines during crises. Banks that do face debt shortages circumvent fire sales by shifting to deposits, issuing equity, and cherry picking. Similarly, we find that hedge funds facing large redemption requests often sell more stock than necessary and use excess proceeds to buy new stock. We conclude that shocks to fundamentals, not illiquidity-induced fire sales, are central to financial crises.
{"title":"Crises, Liquidity Shocks, and Fire Sales at Financial Institutions","authors":"Nicole M. Boyson, Jean Helwege, J. Jindra","doi":"10.2139/ssrn.1633042","DOIUrl":"https://doi.org/10.2139/ssrn.1633042","url":null,"abstract":"We investigate liquidity shocks and shocks to fundamentals during financial crises at commercial banks, investment banks, and hedge funds. Liquidity shock amplification models assume that widespread funding problems cause fire sales. We find that most banks do not experience funding declines during crises. Banks that do face debt shortages circumvent fire sales by shifting to deposits, issuing equity, and cherry picking. Similarly, we find that hedge funds facing large redemption requests often sell more stock than necessary and use excess proceeds to buy new stock. We conclude that shocks to fundamentals, not illiquidity-induced fire sales, are central to financial crises.","PeriodicalId":307682,"journal":{"name":"Midwest Finance Association 2012 Annual Meeting (Archive)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125049276","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 investigate the effect of expected short sales and short sales surprises on abnormal securities returns. We then examine the impact of short sales constraints on the informational efficiency of the equity market based on a major hypothesis of Diamond and Verrecchia (1987). We conduct a series of tests using data from a natural experiment created by an SEC-initiated pilot program under the Regulation SHO reform. We have four major fi ndings: (1) unexpected bad news, speci fically, unexpected short sales, cause signifi cant price adjustment when those unexpected short sales are revealed, (2) surprisingly, expected short sales demand also causes price adjustments after short sales information revelation, (3) short sales surprises have a linear relationship with subsequent abnormal returns, i.e., investors react to different levels of short sales surprises with equal sensitivity, and (4) price tests do not increase short sales constraints in the markets.
{"title":"An Analysis of Market Efficiency in Response to Short Sale Information","authors":"G. Kai, J. Conlon, R. Van Ness","doi":"10.2139/SSRN.1927321","DOIUrl":"https://doi.org/10.2139/SSRN.1927321","url":null,"abstract":"We investigate the effect of expected short sales and short sales surprises on abnormal securities returns. We then examine the impact of short sales constraints on the informational efficiency of the equity market based on a major hypothesis of Diamond and Verrecchia (1987). We conduct a series of tests using data from a natural experiment created by an SEC-initiated pilot program under the Regulation SHO reform. We have four major fi ndings: (1) unexpected bad news, speci fically, unexpected short sales, cause signifi cant price adjustment when those unexpected short sales are revealed, (2) surprisingly, expected short sales demand also causes price adjustments after short sales information revelation, (3) short sales surprises have a linear relationship with subsequent abnormal returns, i.e., investors react to different levels of short sales surprises with equal sensitivity, and (4) price tests do not increase short sales constraints in the markets.","PeriodicalId":307682,"journal":{"name":"Midwest Finance Association 2012 Annual Meeting (Archive)","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132817866","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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