Thesis (Ph. D.)--University of Texas at Austin, 2003. / Supervisor: Ramesh K. S. Rao. Vita. Includes bibliographical references. Available also from UMI Company.

Thesis (M.A.)--Guo li zheng zhi da xue.

Thesis--Nederlandsche Economische Hoogeshool, Rotterdam. / eContent provider-neutral record in process. Description based on print version record. Bibliography: p. [159-160].

Thesis ( Ph.D. ) -- University of Texas at Arlington, 2008.

Thesis (M.B.A.)--University of Hong Kong, 1984.

Thesis (M.B.A.)--University of Hong Kong, 1989.

This thesis includes one essay about the information production of institutional investors and two essays about the monitoring role of institutional investors. The first essay empirically examines the association between investor base and information production in the context of stock splits. Using the proportion of 13F filers as the proxy for the size of investor base, we show that three proxies for stock price informativeness, adjusted probability of information-based trading (AdjPIN), price non-synchronicity and probability of information-based trading (PIN), decrease significantly due to enlarged investor base after stock splits. It suggests that institutional investors are less incentivized to gather firm specific information when firm's investor base expands, which is consistent with the “risk sharing hypothesis”, proposed by Peress (2010). Furthermore, we find that the change of the price informativeness around splits is negatively related to the magnitude of positive return drifts following splits. This result is consistent with the notion that less information incorporated in stock prices results in a sluggish response by the market to corporate event. The second essay empirically identifies an external corporate governance mechanism through which the institutional trading improves firm value and disciplines managers from conducting value-destroying behaviors. We propose a reward-punishment intensity (RPI) measure based on institutional investors' absolute position changes, and find it is positively associated with firm's subsequent Tobin's Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. It suggests that the improved firm values can be attributed to the discipline effect of institutional trading on managers, which is in line with the argument of “Governance Through Trading". Furthermore, we find that the exogenous liquidity shock of decimalization augments the governance effect of institutional trading. We also find that the discipline effect is more pronounced for firms with lower institutional ownership concentration, higher stock liquidity, and higher managers' wealth-performance sensitivity, which further supports the notion that institutional trading could exert discipline on a manager. The third essay focuses on a particular type of institutional investor, short sellers, and explores the discipline effect of short selling on managerial empire building. Employing short-selling data from 2002-2012, we find a significantly negative association between the lending supply in the short-selling market and the subsequent abnormal capital investment. Besides, we find a positively significant association between the lending supply and the mergers and acquisitions announcement returns of acquiring firms. These results suggest that the short-selling potential could deter managers from conducting over-investment and value-destroying acquisitions. In addition, the discipline effect is stronger for firms with higher managers' wealth-performance-sensitivity, for firms with lower financial constraints, and for stock-financed acquisition deals. Finally, firms with higher lending supply also have higher Tobin's Q in the subsequent year. These results indicate that short-selling is another important external governance force. / published_or_final_version / Business / Doctoral / Doctor of Philosophy

This research examines how individuals formulate their investment decisions and the importance of these decisions to the financial marketplace. Traditional finance theory has focused on solving the rational investor's choice problem by considering each financial asset's contribution to the risk and return of the investor's existing portfolio. Alternatively, this study recognizes the inability of most individuals to consider all possible investments in the financial universe, and therefore approaches the investor's choice problem by focusing on environmental and psychological factors that guide the formulation of the investor's selection set. In particular, this research focuses on the importance of attention in influencing the common stock selections of individuals and shows that this attention effect can have a significant impact on the returns of attention-grabbing equities. Additionally, I document the impact of mutual fund family affiliation on the mutual fund investment decisions of individuals and discuss how apparent reputation effects could impact the organization and performance incentives of mutual funds.

The proposed thesis comprises two essays on international investment. Each essay proposes a new theory and provides empirical evidence. The first essay develops a three-moment international asset-pricing model (TM-IAPM) under full integration and deviations from purchasing power parity (PPP) that prices coskewness. The model also embeds the standard IAPMs as special cases when explicit restrictions are imposed. We further apply the model to investigate the time-series behavior of market, size, value, and momentum premiums in the United States, Japan, and the United Kingdom equity markets. We find that the model explains most of the variation of these premiums during the 1980s and 1990s and that the coskewness risk is more important than covariance risk. We also find that the model performs well out-of-sample. The direct implication of our result is that linear IAPMs are misspecified and that investors should use nonlinear models to price international assets. The second essay proposes a way to disentangle the test of market efficiency from the test of the postulated equilibrium model. Indeed, the efficient market hypothesis, which stipulates that prices fully reflect available information, is one of the most important building blocks in finance and economics. Unfortunately, there is no consensus on this important issue since the methodologies used to test market efficiency are subject to the well-established joint-hypothesis problem. We derive three propositions that build on the well-known Sharpe ratios with the specific aim to split the test from the joint-hypothesis into two separate tests. We apply the new approach to examine the efficiency of the United States, Japan, and the United Kingdom markets over the period 1981-2000. Our results suggest that the rejection of the efficient market hypothesis may be premature. We thoroughly discuss the bias underlying the traditional approaches and propose a way to solve the problems.

Thesis (Ph. D.)--University of Texas at Austin, 2007. / Vita. Includes bibliographical references.