Financial Markets, Institutions and Instruments最新文献

We show that the acquiring firm's idiosyncratic stock return volatility (sigma) is an important determinant of the selection and perceived valuation effects of earnouts in Mergers and Acquisitions (M&As). Earnout-based M&As are more often announced by high-sigma acquirers (nearly 40% of all earnout-based M&As), yet the documented higher risk-adjusted returns accrued to acquirers in earnout-based M&As, relative to M&As settled in cash, stock or mixed payments (the earnout effect), appear in deals announced by low-sigma acquirers (nearly 20% of all earnout-based M&As). High-sigma acquirers employing earnouts appear to break even, or even experience losses, relative to their counterparts employing single up-front payments. These results are confirmed based on a quasi-experimental design through which the earnout effect is measured in isolation. We argue that in M&As announced by high-sigma acquirers, the earnout effect is potentially elusive due to the presence of an acquirer-specific information revelation effect, resulting from the heightened extent of information asymmetry between (small) acquirers’ managers and outside investors. On the contrary, the use of earnouts in M&As announced by low-sigma (large) acquirers, whereby the acquirer-specific information revelation effect is likely negligible, sends a strong signal for value creation that also prevents investors from inducing a size-related discount.

We provide evidence on how corporate bond investors react to a change in yields, and how this behaviour differs in times of market-wide stress. We also investigate ‘reaching for yield’ across investor types, as well as providing insights into the structure of the corporate bond market. Using proprietary sterling corporate bond transaction data, we show that insurance companies, hedge funds and asset managers are typically net buyers when corporate bond yields rise. Dealer banks clear the market by being net sellers. However, we find evidence for this behaviour reversing in times of stress for some investors. During the 2013 ‘taper tantrum’, asset managers were net sellers of corporate bonds in response to a sharp rise in yields, potentially amplifying price changes. At the same time, dealer banks were net buyers. Finally, we provide evidence that insurers, hedge funds and asset managers tilt their portfolios towards higher risk bonds, consistent with ‘reaching for yield’ behaviour.

This study examines the relation between managerial ability and bond credit rating changes. We attempt to add to the credit rating agency literature by exploring the role managerial ability plays in the initial bond rating assignments and in rating changes. We predict firms with more-able managers are more likely to have higher bond ratings and to be more able to have a positive influence on rating changes. We find a significant and positive relation between managerial ability and change in credit ratings, suggesting that more-able managers can take effective actions to improve their credit ratings.

This study examines relative price discovery for three major European indices, FTSE, CAC, and DAX, their futures and exchange traded funds (ETFs) using the data on 5-minute intraday transaction prices over a four-year period. We computed both Hasbrouck (1995) information share with error bounds and Gonzalo and Granger's (1995) common factor weights approach. Gonzalo and Granger's (1995) common factor weights suggest the index futures contracts play a dominant role in price discovery in the CAC market: the CAC 40 index futures lead the price discovery and Lyxor CAC 40 ETFs serving the second resort for information transmission. This could be due to the less frequent trading of ETFs. More importantly, CAC40 under the Gonzalo & Granger (1995) test shows upper and lower error bounds in good range may be the main reason to drive for the meaningful results. In contrast, the upper and lower bounds estimated from the Hasbrouck (1995) are far distant for most cases. Finally, FTSE and DAX markets offer compelling evidence to show that ETFs lead price discovery and spots and futures follows.

This study examines environment, social, governance (ESG) consideration in rating reports published by credit rating agencies. 3,719 Moody's credit rating reports between 2004 and 2015 are examined and the ESG consideration is analyzed using a latent dirichlet allocation (LDA) approach. We further analyze the stock returns and credit default swap (CDS) spread changes to check whether ESG consideration has an effect on the capital market reactions. We find a small but present consideration of ESG in rating decisions. Within ESG, corporate governance plays the most important role. Moreover, the results reveal that ESG consideration is a significant determinant in the stock return and CDS spread around the rating announcement. We find that all ESG criteria are important for equity and debt investors.

This paper examines the relationship between business group affiliation and stock price informativeness in an emerging market setting. We use stock price synchronicity as a measure, and study the impact of group affiliation -specifically the extent of affiliation, ownership structure and existence of group bank- on firm specific information content. Results reveal that the amount of firm-specific information capitalized into stock prices tends to be lower (higher) when the firm is group-affiliated (unaffiliated), indirectly (directly) owned, and affiliated group has (does not have) a group bank. Additionally, the extent of group affiliation maintains a non-linear relationship with synchronicity, suggesting that the perception of higher versus lower levels of group ownership differs.

We consider the role of trustees–who are nominated to protect the interests of investors–in securitization pricing and whether investors rely on them to mitigate risks. In particular, we examine the effect of trustee reputation on initial yield spreads of European mortgage-backed security (MBS) issuances between 1999 and the first half of 2007. We find that engaging reputable trustees led to lower spreads during the credit boom period prior to the 2007–2009 financial crisis. Our findings suggest that trustees’ reputation was considered by investors to be more important when risk assessment became more challenging.

The volatility of aggregate economic activity in the United States decreased markedly in the mid-eighties. The decrease involved several components of GDP and has been linked to a more stable economic environment, identified by smaller shocks, more effective policy, and a diverse set of innovations in technology as well as financial markets. We study one such financial innovation, and document a negative relation between the rapid growth of mortgage-backed securities and the volatility of GDP and some of its components from the mid-1970s to the late 1990s. We also document that this relation changed sign, from negative to positive, in the early 2000s.