published_or_final_version / Computer Science / Master / Master of Philosophy

This thesis includes one essay on incomplete information and two essays on the capital market implications of asymmetric information. The acquisition of information and its dissemination to all economic units are central activities in capital markets. Limits to information diffusion may exist when market participants have limited processing ability or when market structure causes information asymmetry to persist. Merton (1987) proposes a simple capital market equilibrium model with incomplete information, in which difference in a stock’s investor recognition affects its cost of capital. Myers and Majluf (1984) lay out the theoretical foundation for the role of asymmetric information in corporate finance and its capital market implications. The first essay tests and offers support to Merton’s (1987) theory. In the U.S. market, using the breadth of ownership among retail investors as a proxy for investor recognition, I show that a long-short portfolio based on the annual change of shareholder base earns a compounded annual abnormal return of 6.42% after controlling for the Fama-French three factors. These results are more pronounced among young, low visibility and high idiosyncratic volatility stocks. Moreover, I present evidence that the investor recognition effect can explain approximately 20% of the puzzling net equity issuance effect documented by Pontiff and Woodgate (2008). The second essay suggests a novel signaling mechanism in the framework of asymmetric information. When a firm’s convertible debt is issued, it is not only determined by the fundamentals of the firm such as past stock performance, but also related to whether this performance is realized during the tenure of current CEO who decides the issues. I define the performance that the current CEO achieves in the firm ever since the CEO comes to the helm as CEO-specific performance. Higher CEOspecific performance leads to (1) a higher probability of convertible issues, and (2) a less negative abnormal stock return in response to the convertible issue announcement, controlling for other firm characteristics. These evidences indicate that CEO-specific performance serves as a credible information signal to influence the adverse selection costs between the firm and outside investors in convertible bond financing. The third essay explores the possibility of asymmetric information in explaining the pronounced share issue anomaly in the cross-sectional variations of stock returns, as documented by Pontiff and Woodgate (2008). A lot of equity share issue and repurchase actions are actively determined by the decision of corporate stakeholders, such as employees at the stock options exercises. As these stakeholders hold a large amount of private information about the firm, it is in their optimal decisions to try to time the exercise of their share purchase activity, but outside investors are likely to fail to interpret the information revealed from these actions. I present strong evidence that a negative relation between share issues and stock returns is affected to a greater extent when the information asymmetry problem is more severe. / published_or_final_version / Business / Doctoral / Doctor of Philosophy

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published_or_final_version / Electrical and Electronic Engineering / Doctoral / Doctor of Philosophy

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The concept of a frame was introduced in the mid-sixties by Dowker and Papert. Since then frames have been extensively studied by several authors, including Banaschewski, Pultr and Baboolal to mention a few. The idea of a nearness was first introduced by H. Herrlich in 1972 and that of a nearness frame by Banaschewski in the late eighties. T. Dube made a fairly detailed study of the latter concept. The purpose of this thesis is to study the property of local finiteness and metacompactness in the setting of nearness frames. J. W. Carlson studied these ideas (including Lindelof and Pervin nearness structures) in the realm of nearness spaces. The first four chapters are a brief overview of frame theory culminating in results concerning regular, completely regular, normal and compact frames. In chapter five we provide the definitions for various nearness frames: Pervin, Lindelof , Locally Finite and Metacompact to mention a few. A particular locally finite nearness structure, denoted by µLF, is studied in detail. It is defined to be the nearness structure on a regular frame L generated by the family of all locally finite covers on the frame L. Also, a particular metacompact nearness structure, denoted by µPF, is studied in detail. It is defined to be the nearness structure on a regular frame L generated by the family of all point-finite covers of the frame L. Various theorems related the above nearness frames and these nearness structures are obtained. / Thesis (M.Sc.)-University of Durban-Westvile, 1998.