Thesis (M. Sc.)--University of Hong Kong, 1996. / Includes bibliographical references (leaves 79-82).

published_or_final_version / Politics and Public Administration / Master / Master of Public Administration

This thesis includes two essays on equity analysts’ agent role and one essay on investors’ inattention to good news. From a broader economic perspective, equity analysts are essentially agents acting on behalf of multiple principals including their employers, investors and issuers (Fisch & Sale, 2003). Classic agency theory predicts that analysts selectively provide coverage and report their expectations. In the first essay, I examine empirically if incremental investment value can be uncovered from analysts’ choices between silence and speech, measured as the level of analyst reporting not explained by size or turnover. I find that “silence” negatively, and “speech” positively predicts future stock returns. More importantly, as “speech is silver, silence is golden”, the observed price shift is mainly driven by silence, providing evidence that analysts’ inaction can impede price discovery process. This is consistent with the claims that analysts’ expectations are based on valid information, that analyst self-selection is pervasive due to the principal-agent conflicts, and that the loss of information with analyst silence has resulted in some mis-valuation which can be viewed as a form of classic agency cost. The second essay tests if analysts are systematically less forthcoming in reporting bad earnings news when the principal-agent conflicts are exacerbated. I find that analysts’ downward consensus earnings forecast revisions are less informative than their upward revisions; that less is more when analysts report bad news - extreme downward revisions contain little incremental information beyond momentum compared with moderate downward revisions; and that the differential richness of information in good and bad news revisions is more pronounced among bigger, more heavily covered stocks and stocks with higher institutional holdings, namely, stocks that are typically more prone to the analyst agency problem. Thus the loss of information in bad news revisions and extreme bad news revisions’ lagging behind price action can be viewed as another form of agency cost. In the third essay, I investigate how negativity bias in information processing affects the positive-negative-asymmetry in the stock price continuation phenomenon. Psychology literature document that negative stimuli elicit more attention and negative information is generally processed more thoroughly and is weighed more heavily in impression formation, memory, learning and decision making than positive information (Baumeister, Bratslavsky, Finkenauer, & Vohs, 2001; Rozin & Royzman, 2001). Insofar as people are cognitive misers, all else being equal, investors tend to pay less attention to good news than to bad news. Using earnings announcement as the information shock, I document evidences that investors incorporate bad earnings news to fuller extent than they do with good earnings news. Furthermore, given that psychological biases are typically increased when there is more uncertainty (Hirshleifer, 2001) and ambiguity or uncertainty is often associated with higher risk and the possibility of hostile manipulation, I also find more pronounced asymmetry in post announcement drift when information uncertainty is greater. / published_or_final_version / Business / Doctoral / Doctor of Philosophy

This dissertation examines issues in banking and the financing of corporate investment. The first chapter investigates the impact of changes in a bank's health on the investment behavior of its current borrowers for a panel of U.S. firms. I find that, after controlling for aggregate credit availability and the condition of outside banks, firms reduce their investment when the health of their primary bank deteriorates. This effect is only present while the firm maintains a borrowing relationship with the bank and does not appear to be driven by changes in region or industry specific investment opportunities. The health of the existing lender is more important for younger, more opaque firms with greater reliance on their primary bank. I also find that this effect became less significant after the early 1990s, suggesting that bank dependence appears to diminish during long periods of stability. However, results from the recent financial crisis show that healthy banking relationships remain very important to U.S. firm investment. The second chapter, adapted from joint work with Richard Lowery, examines the determinants of covenant structure in private debt contracts. While previous studies have demonstrated a relationship between firm characteristics and the overall strictness of loan contracts, few studies have examined why covenants are written on a range of accounting variables and what determines their selective use. Using a simple model of firm investment where firms face uncertain cash flows and investment opportunities, this essay characterizes the conditions under which it is optimal for a debt contract to specify a restriction on investment or to specify a minimum cash flow realization. Consistent with this model, empirical evidence demonstrates that the application of covenants based on these variables is not necessarily monotonic in firm risk. While the financially riskiest firms tend to employ capital expenditure covenants, cash flow and net worth covenants are most common among moderately risky firms with greater profitability and firms with stronger baking relationships. The results also highlight the importance of debt covenants in both mitigating agency frictions and maximizing the value of future private information. / text

published_or_final_version / abstract / toc / Real Estate and Construction / Master / Master of Science in Real Estate and Construction

In the Master’s Paper the ways of assessment of efficiency of investment projects employed by Lithuanian and foreign authors as well as the models for investigation of event development forecasts and index interrelationships were analyzed and systematized. Potentiality of the joint-stock company's investment development was analyzed and its efficiency was assessed. The state of the company's financial activity was investigated thoroughly, the project for the investment development was made and its impact on the company's general financial situation was evaluated. The author's scientific investigation hypothesis that the supposed investment development would not only allow for getting some extra income and profit but would also improve the general financial indexes was confirmed.

Compared to the previous twenty years, residential investments in the US appear more stable after the mid-1980s. Chapter 2 explores key hypotheses regarding the underlying causes. In particular, it uses estimated DSGE models to examine whether a more responsive interest rate policy stabilizes the housing market by keeping inflation in check. These estimations indeed found a policy that has become more responsive over time. Counter-factual analysis confirms that the change stabilizes inflation as well as nominal interest rate. It does not, however, find the change in policy to have stabilizing effect on real economic activity including housing investment. It finds that smaller TFP shocks make modest contributions, while the biggest contributing factor to the fall in the housing volatility is a reduction in the sensitivity of the investment to demand variations. Chapter 3 constructs a richly specified model for the housing market to examine the empirical relevance of various costs and frictions, including the investment adjustment cost, sticky construction costs, search frictions, and sluggish adjustment of house prices. Using the US national-level quarterly data from 1985 and 2007, we find that the gradual adjustment of house prices is the most important and irreplaceable feature of the model. The key to developing an optimization-based empirical housing model, therefore, is to provide a structural interpretation for the slow adjustment in house prices. Chapter 4 uses US national-level time series of residential investment, price index of new houses, consumption and interest rate to explore whether the US, as a nation, experienced a drop in the price elasticity of supply of new housing. Maximum likelihood estimations with a simple stock-and-flow model found a statistically significant drop of the elasticity from 10 to 2.2, when the quarterly data between 1971 and 2007 are split at 1985. A richer model with mechanisms of gradual adjustment also indicates such a reduction, when existing knowledge about the adjustment parameters is incorporated in the analysis. For the Federal Reserve, an inelastic supply can be a source of concern, because policy-driven demand in housing market is more likely to trigger undesirable swings in prices.

This thesis examines the international growth and diversification of real estate advisory services in the United States, the United Kingdom, Germany, and Japan from over a 30-year period, 1960-1990. These four countries were selected because they were the most active in cross-border direct investment during this period, and intricate economic interdependencies among them prompted the greatest advancements in innovative real estate advisory services. Economic and cultural differences and similarities among the four focal countries and their respective service professions provide the bases for evaluating the primary hypothesis: the internationalization of real estate advisory services were most efficiently and effectively achieved by firms that first built solid reputations in their home nations, and subsequently expanded into multiregional organizations by responding to the cross-border investment activities of existing and prospective multinational clients. If leading firms in the focal countries expanded in domestic markets to capitalize on the national economy's maturing real estate markets, then moved into foreign markets to capitalize on rising cross-border investment flows over the 1960-1990 period, the primary thesis raises a question about the relative significance of cross-border real estate investment to national economic conditions, generally, and to the growth of commercial real estate markets and sectoral employment in the focal countries, specifically. A secondary hypothesis, therefore, is tested to identify the relative impact of total cross-border real estate investment flows on employment levels in the commercial real estate sector in the U.S., U.K., Germany, and Japan. This thesis also examines the several dimensions of the economy and financial system affected by domestic and foreign investment in commercial real estate assets after 1960. For example, rising worldwide commercial property investment appeared to be an important factor in the escalation of corporate real estate values, in the growth of construction industries and related services sectors, in the changes in the net worth of major financial institutions, and in the asset diversification of insurance and pension fund portfolios. As part of this trend, the growth of international business and the rise in mergers and acquisitions also elevated cross-border direct investment activity in real estate as companies expanded into foreign markets. This thesis explores the process by which property advisory services internationalized and gained an important role in the global service economy by counseling investors on the location and volume of investment activities, and thereby influencing the international flow of real estate investment funds. It also examines whether real estate advisory firms in the focal countries gained competitive advantage over the 30-year period due to the presence of two basic conditions: an international network of property professionals; and a diversified services practice--brokerage, property management, finance, facilities planning and development, and real estate sales and purchases. By reviewing national fluctuations in cross-border direct investment in real estate, and periodic changes and major episodes in the foreign expansion of real estate advisory services in the focal countries, this thesis seeks to examine specific national factors that influenced effective internationalization in domestic property services. Basic principles in economic history provide the theoretical framework concerning competitive and comparative advantages among nations and particular organizations.

Pirmojoje darbo dalyje suformuota TUI svarba ir vieta tarptautinėje prekyboje.Antroje dalyje analizuojama tiesioginių užsienio investicijų situacija bei vystymas Lietuvoje. Atskleidžiama tiesioginių užsienio investicijų (TUI) daroma įtaka ekonominiam augimui Lietuvoje bei nustatomos tendencijos ateityje. Atliekama tiesioginių užsienio investicijų statistinė analizė, aptariama tyrimo, atliekamo trečiojoje dalyje, metodologija. Trečioje dalyje sudaromi regresiniai modeliai, analizuojama tiesioginių užsienio investicijų (TUI) struktūros ir bendro vidaus produkto (BVP) augimo koreliacija. Remiantis slenkančio vidurkio, eksponentinio išlyginimo bei tiesinio trendo metodais, prognozuojamas tiesioginių užsienio investicijų (TUI) bei bendro vidaus produkto (BVP) dydis 2009 metams bei nustatomos pagrindinės didėjimo/mažėjimo tendencijos. Pateikiami atlikto tyrimo rezultatai, tikrinant tyrimo hipotezę, išvados bei pasiūlymai. / The object of the paper is foreign direct investment. The main purpose of the work: to find the best method for estimation of relationship between foreign direct investment and economic growth. The paper consists of three parts. In the first part main terms and attitudes of foreign direct investment are given. The basic principles of their structure, features are analysed. In the second part the relationship between foreign direct investment and economic growth is analyzed. The basic methodology of the analysis is given. In the third part, correlation regression models of foreign direct investment‘s structure by economic sectors and gross domestic product have been calculated. It can be maintained that foreign direct investment have a big impact on economic growth in Lithuania.

No description available.