<p> Stakeholders are increasingly insistent that companies increase firm value. The problem is that stakeholders of financial services firms are unable to accurately determine firm value. The purpose of this correlational study was to examine the accuracy of 4 valuation models in predicting the market value of equity of commercial finance companies. Study participating companies were 8 listed U.S. or Canadian commercial finance companies. The theoretical constructs of the study included the accuracy of valuation models, modern portfolio theory, and the correlation of book value of equity to market value of equity. Financial information on participating companies obtained from public filings were input data in 4 valuation models. Multiple regression analysis of valuation model results and book value of equity (the predictor variables) were used to determine the accuracy of the models in predicting the market value of equity (response variable). The findings of the study showed that all 4 valuation models in combination with the book value of equity were statistically significant predictors of the market value of equity of the participating companies at the <i>p</i> &lt; .05 level. However, the dividend discount model (DDM) and residual income model (RIM) were statistically more accurate without the combination of book value of equity (<i>p</i> = .000 and <i>p</i> = .000, respectively) than the discounted cash flow and risk-adjusted discounted cash flow valuation models (<i>p</i> = .371 and <i>p</i> = .904, respectively). The results of this study contribute to positive social change by providing business leaders an ability to measure the effectiveness of their actions in creating firm value. Corporate social responsibility activities correlate to value creation for firms that engage in promoting employee welfare and other stakeholder welfare.</p>

Thesis (Ph. D.)--Syracuse University, 2009. / "Publication number: AAT 3381587."

<p> Most microloan applicants in Nigeria are denied access to financial services by the commercial banks because of the high risk involved in granting loans to an individual without tangible assets to offer as collateral. The purpose of this qualitative multiple case study was to explore small business owners&rsquo; understanding of suitable funding options from microfinance banks in Nigeria to sustain their businesses beyond the first 5 years. An investigation was conducted on how small business owners could obtain information on funding options most suitable to sustain their business. Guided by the ethical banking operations framework theory, the strategies business owners had used was explored to understand available funding options. A homogenous sampling strategy was used to purposefully identify and select the microfinance applicants who had similar experiences using different funding options. Fifteen customers of microfinance institutions (MFIs) participated in semistructured interviews. Additional data on MFIs was obtained from established secondary sources. Yin&rsquo;s 5-step process was used to analyse the data, with member checking and triangulation used for validation. Key findings emerged on lack of appropriate entrepreneur training, inadequate financial management, skills gap, and inability to interpret the bank&rsquo;s information on loan procedures. This revealed the need to develop ways for small business owners to more easily access information on loan options. MFIs may use the findings of the study to enhance access to their financial services and promote the growth of MFIs to increase sustainable economic growth for both owners and the local communities they serve. Positive social change may be promoted through financial empowerment and job creation.</p><p>

The rapid growth of hedge funds in recent years has been accompanied by cases of severe failure. Since the aftermath of Long Term Capital Management (LTCM), investors recognize that hedge funds may provide high expected returns but they might be exposed to a huge downside risk that is not easily detected by traditional risk measures. My dissertation consists of three essays on the risk of hedge funds. In the first essay, I use a cross-sectional approach to analyze the risk-return trade-off. I compare semi-deviation, value-at-risk (VaR), Expected Shortfall (ES) and Tail Risk (TR) with standard deviation. Using the Fama and French (1992) methodology and TASS data, I find that the left-tail risk captured by Expected Shortfall (ES) explains the cross-sectional variation in hedge fund returns very well, while the other risk measures provide insignificant results. During 1995–2004, hedge funds with high ES outperform those with low ES by an annual return difference of 7%. In the second essay, I implement a survival analysis based on the Cox proportional hazard (PH) model to compare downside risk measures with standard deviation in predicting hedge fund failure. I find that funds with high ES have a high hazard rate when controlling for the style effect, performance, fund age, size, lockup, high-water mark (HWM) provision, and leverage. Standard deviation, however, loses the explanatory power when the other explanatory variables are included. As I find that liquidation does not necessarily mean failure in the hedge fund universe, I suggest simple criteria such as the last six-month return and change in fund size rather than the stated drop reasons to calibrate hedge fund failure. I reexamine the attrition rate of hedge funds based on these findings and argue that the real failure rate of hedge funds (3.1%) is lower than the attrition rate (8.7%). In the third essay, I focus on the liquidity risk premium. I examine the relationship between hedge fund share restrictions and liquidity premium by comparing offshore and onshore hedge funds. Due to tax provisions, offshore and onshore hedge funds have different legal structures, which lead to differences in share restrictions. On average, offshore funds impose less share restrictions, hence they underperform their onshore counterparts due to illiquidity premium, consistent with Aragon (2007). However, I find that once offshore funds impose share restrictions the illiquidity premium is higher because of a tighter relation between share illiquidity and asset illiquidity in offshore funds. Introducing the lockup provision increases the abnormal return by 4.4% per year for offshore funds compared with only 2.7% for onshore funds. I also find that share illiquidity premium becomes lower when an offshore fund is affected by its onshore equivalence through a master-feeder structure.

My dissertation consists of three chapters covering mutual fund terminations, survivorship bias, and smart money effect, respectively. The first chapter examines domestic equity fund terminations through the determinants of the hazard function. It finds that the lagged 3-month return, the standard deviation of return, the Sharpe ratio, and the price to book ratio best explain equity fund closures. Due to the interaction between time and the lagged 3-month return, we reject the proportionality assumption of the semi-parametric Cox model, thus invalidating the use of this model to estimate the hazard function of mutual funds. In addition, we find that different fund categories exhibit distinct hazard functions. The second chapter revisits survivorship bias within domestic equity mutual funds from the middle of 1998 to the middle of 2004. Using Morningstar Principia and tracking both disappearing funds and name changes, we report a statistically significant difference in performance between the complete sample and the survivorship-biased sample, both in raw returns and in risk-adjusted returns. We correlate this potential for a disproportional weighting of better performing funds to market conditions and show that changes in stock market indexes and interest rates have a bearing on the level of fund survivorship bias. The third chapter reexamines the relationship between mutual fund performance and new cash into the fund. We first estimate the major determinants of fund flows and performance cross-sectionally. Then controlling for both size and style, we show that positive new cash flow portfolios have significant risk-adjusted returns in the subsequent period. Granger causality test demonstrates that a causal relationship exists between fund performance and new cash flows for several groups of funds. Specifically, we find that fund performance Granger causes new cash flows and therefore find a "naïve" money explanation rather than a "smart" money explanation.

Hedge fund managers are largely free to pursue dynamic trading strategies and standard static performance appraisal is no longer accurate for evaluating hedge funds. Accordingly, chapter 1 presents some new ways of analyzing hedge fund strategies following a dynamic linear regression model. Chapter 2 examines hedge fund asset allocation dynamics through conducting optimal changepoint test on an asset class factor model. Based on the average F-test and the Bayesian Information Criterion (BIC), we find that dynamic hedge funds have significantly better quality than non-dynamic funds, signaled by lower volatility in returns, stricter share restrictions, and high water mark provision. In particular, a higher degree of dynamics is shown to be associated with better risk-adjusted performance at the individual fund level. Sub-period analysis suggests that the superiority of asset allocation dynamics is mostly driven by earlier time periods before the peak of the technology bubble. Flow analysis suggests that returns in the hedge fund industry are diminishing as capital flows in and arbitrage opportunities are not infinitely exploitable. Chapter 3 examines both the self-reported classification and return-based classification on a sample of hedge funds over the period of 2005 to 2010. Using seven versions of Lipper/TASS data, we are able to track self-reported styles year by year; return-based classification follows a clustering algorithm called Partitioning Around Medoids (PAM). We show non-negligible style dynamics in both classifications, suggest that static hedge fund classification is inappropriate. Although a few self-reported categories, e.g. managed futures, appears to be consistent with the return-based grouping. We show that a hedge fund's attractiveness relative to its peers differ by different classifications. We construct a disagreement measure, quantifying how much a fund's performance percentile differs by its self-claimed classification and by its return-based classification; it is found that right tail funds in the disagreement measure perform significantly better than the left tail funds. Moreover, we find that fund flow is positively related to the disagreement measure controlling for performance and fund characteristics. The results are robust to alternative disagreement measure or extended sample period.

This dissertation addresses research issues in the area of interest rate risk management of default-free government bonds. The main theoretical contribution is the development of non-arbitrage permitting duration models that are independent of the underlying stochastic process of the term structure. This allows protection of the nominal value of the government bond portfolios from virtually any type of non-parallel term structure shift. Various limitations of the traditional duration theory are considered using the insights obtained from the generalized duration models developed here. For example, properties of bond convexity are considered under equilibrium conditions that make no restrictive assumptions about the stochastic processes governing the term structure. Under these conditions the analysis reveals an important link between convexity and slope shifts in the term structure. Specifically slope shifts are shown to increase the riskiness of an immunized portfolio as the convexity exposure deviates form an optimum level. Thus, high convexity is not always desirable. Limitations of the M-square model (see Fong and Vasicek (1983, 1984)) are analyzed and new scalar and vector immunization risk measures are derived that overcome these limitations. It is shown that the risk measure M-square cannot be applied to immunize a bond portfolio with short or forward positions. Second, even when short positions are disallowed, it can be shown that risk measure M-square is not unique for obtaining a lower bound on the terminal value of a bond portfolio. A vector of immunization risk measures (termed collectively as the "M-vector") is derived that allows for short positions and forward positions. Finally a portfolio theory approach to the M-vector model is presented. The duration vector of Chambers, Carleton and McEnally (1988) is found to be a limiting case of the more generalized duration models developed in this research. It is shown that the duration vector of Chambers et al. is based on a polynomial return function for bonds. This dissertation derives alternative duration vectors based on various asymptotic and non-asymptotic return functions (such as polynomial, exponential, and trigonometric functions). Multiple regression tests performed to identify the appropriate return function for government bonds find that traditional duration vector of Chambers et al. performs as well as any other return function. Finally closed-form solutions are derived for various interest rate risk measures (i.e. convexity, M-square and the duration vector) proposed in the immunization literature.

<p>The purpose of this qualitative single-case study was to explore the publicly documented perceptions of the SEC regulators to determine if SOX 404 requirements have been supportive of influencing transparent financial reporting, preventing fraudulent financial statements, or misrepresentation of ICFR. A total of 15 archived, secondary, publicly available documents, representing 15 different SEC regulators? perspectives, were retrieved from the SEC website over a research time frame of July 30, 2002 until November 1, 2010. The samples were explored to identify the common perspectives of the 15 SEC regulators? relative to the effectiveness of SOX 404, and determine the overall perspectives of the holistic SEC entity or single case. Nvivo 8 was used to perform the data analysis and yielded 9 common themes. The findings revealed that although the SEC deemed SOX 404 supportive of influencing transparent financial reporting, preventing fraudulent financial statements, or misrepresentation of ICFR, the Commission was aware that gaps and opportunities for enhancing the law to promote its effectiveness and remove inefficiencies existed. The findings also revealed that the SEC was conscious of the issues, topics, opinions, observations and findings raised by SOX 404 critics and complying companies, and have been attentive, responsive and willing to address to those matters.

<p> This study analyzed activism that leads to a merger or acquisition (M&amp;A) of a firm to see its benefits for the shareholders at the target firm as well as its acquirer. It used over thirty years of data to understand the impact of the activists&rsquo; demands of strategic significance for the firms. It examined the premium fetched at acquisition announcement, bid counts and cash versus stock offers to see the benefits of activism to the target firm and its shareholders. It checked the performance reflected in the premium fetched to compare activists based on their overall experience, industry specialization and ownership stake. Most importantly, it analyzed the long-term post-acquisition performance of firms for cases that involved the activists versus others. It noted that the involvement of activists led to above 30% premium for the target firms benefitting its shareholders, as compared to about 15-20% for the non-activism related M&amp;A. It also observed a 30% increase in the post-acquisition performance of the acquirer or the merged firm up to five years after the effective date of the M&amp;A transaction for an activism related M&amp;A, as compared to others. The results provide strong evidence that activism leads to positive value creation for the shareholders of a target firm at the time of acquisition. It challenged the popular perception that activists are near-term focused investors and corporate raiders. It found that activists bring lasting gains to the acquirer and its shareholders. The strategic changes brought in by the activist continue to influence the performance of the target and its acquirer for the long-term. It concluded that activists help discipline a target firm in the short as well as the long terms. Investor activism can steer M&amp;A to successful outcomes for the target and the acquirer. It also observed the positive spillover effects of activism on comparable firms in the M&amp;A context.</p>

Disclosure in financial statements in general has been the subject of many studies, yet disclosure in banks' financial statements has not yet been given the attention and research it deserves. Such a lack of attention might be due to the financial statements users themselves not paying enough attention to it, or due to the banks' management not being keen to practise more disclosure within their financial statements.In Kuwait, disclosure in general, and within the banking industry in particular, has been receiving more attention for the last ten years or so, but such attention has not been explained yet.International accounting standard No.30 forms the foundation of the disclosure in the banks financial statements and similar institutions, and as Kuwait implemented the International Accounting Standards in 1990, banks fell under the IAS 30 requirements regarding the disclosure in their financial statements. In this exploratory study, two avenues are investigated: first, users' evaluation of the disclosure level within the banks' financial statements in Kuwait; and second, the measurement of the actual disclosure in the banks' financial statements in Kuwait. Asurvey method is applied to evaluate the disclosure level in the banks' financial statements, while an index method is applied to for measuring the disclosure level in the banks' financial statements.