This study investigates the impact of growth on the value relevance of accounting data. Indirect evidence in the contracting literature suggests differences in value relevance is negatively related to growth, but to date evidence to empirically document the relationship is mixed. In contrast to previous research, this study analyzes the effect of growth on value relevance from a security price perspective, using the recently developed Ohlson model, and uses the analysts' five-year growth in EPS forecast as the proxy for growth which focuses on growth in terms of value to the investor. This study also considers the effect of growth on the persistence of abnormal earnings as well as the incremental information content of book value beyond earnings. The results provide evidence that the value relevance of accounting data is decreasing in growth. These findings are robust to different samples, other growth proxies, and controls for size and the lead-lag structure of prices and earnings. The evidence relating growth to persistence is inconclusive, suggesting persistence is more sensitive to the characteristics of the individual firms which make up each growth portfolio than the quality of accounting data. The findings also indicate the incremental information content of book value is greater for low growth firms compared to high growth firm, further supporting the hypothesis that the accounting data of high growth firms does not capture value relevant events as well as the accounting data of low growth firms. Overall, this study contributes to the understanding of cross-sectional differences in the valuation of securities by providing evidence that growth negatively affects the quality of accounting information.

During the last ten years, the number of workers covered by defined benefit retirement plans has fallen precipitously. At the same time the number of workers covered by defined contribution plans has climbed to record levels. This study examines whether the changes in accounting and tax regimes contributed to the decreasing emphasis by firms on defined benefit pension plans. I control for economic variables identified in prior studies as determinants of pension choice. I also control for variables identified in the popular press as being responsible for the change in emphasis. This study extends prior pension choice literature by looking at previously identified pension determinants over an extended period of time and interacts those determinates with changes in accounting and tax regimes. I find that both the changes in accounting and tax regimes motivated firms to de-emphasize defined benefit plans.

In Chapter One of this dissertation we present evidence consistent with the hypothesis that firms select a price range for their shares that appeals to a particular ownership clientele. We find a statistically significant relationship between three proxies for the ownership clientele and firms' share prices. We also find that firms with larger investors, as measured by the dollar investment of the average shareholder, have higher share prices. Because it is costly for firms to attract a different ownership clientele, they take actions, such as stock splits, which keep their share prices within a particular range. We show that firms are more likely to split, the further their share price deviates from it's optimal range. Chapter Two examines the role of the underwriter's reputation and certification in seasoned equity offerings. Our findings indicate that the portfolio of securities underwritten by high-quality underwriters outperforms the portfolio of securities underwritten by low-quality underwriters. However, we also find that portfolios formed solely on the basis of publicly available information match or better the performance of the portfolio of securities underwritten by high-quality underwriters. The implication of this latter result is that investors do not need underwriters to identify high-quality firms when buying SEO's. This finding adds to the puzzle of why public firms that issue equity use underwriters.

Chapter one presents evidence that a strong lending relationship exists between borrower firms and their commercial bank lenders that is altered by bank mergers. Negative abnormal stock returns experienced by firms borrowing from banks are investigated to ascertain the explanatory power of the relationship lending hypothesis. Negative returns are found to be attributable to the change in the lending relationship brought about by bank mergers. In addition, we find evidence of a delayed capital-market response by borrower firm stockholders to bank merger events. We conclude that borrower firms incur significant economic costs in response to changes in their banking relationships resulting from bank mergers. Chapter two tests the hypothesis of managerialism, defined as top executives seeking to maximize their own wealth in terms of compensation and perquisites rather than maximization of the banking firm's value. This chapter presents evidence contrary to the managerialism hypothesis. It appears the 1991 FDICIA law has effectively mitigated managerialism in the ranks of top bank executives. However, the evidence also suggests that executives in upper-middle management of merged banks have not been constrained by FDICIA. These upper middle-level executives consistently receive higher compensation than their non-merged peers.

This study investigates the impact of taxes and risk on firm's repurchasing decision and the subsequent market reaction to their announcement. I extend the repurchase literature by examining the tax and risk motivations for firms repurchasing their stock and increasing their borrowing, while controlling for the alternative explanations for repurchases. In a stock repurchase, a firm can quickly change the ratio of debt to equity in its capital structure, and, when combined with the positive change in debt, a setting where the firm is altering the balance of its capital structure in two similar directions is revealed. If there are both significant benefits and costs to debt financing, as suggested by trade-off theory, then firms should make financing choices that are related to these factors. The results revealed that firms increasing their borrowing as part of the repurchase transaction are significantly more under-leveraged, realize greater tax benefits, and have lower default risk than firms that are decreasing their borrowing. These findings are consistent across univariate analysis and multivariate logistic analyses that control for free-cash-flow and signaling explanations. Also, I show that the tax benefits for firms increasing their debt are positively related to the announcement period abnormal returns. Collectively, these results suggest that debt-financed repurchases are being used, in part, to re-balance firms' capital structures, and that the resulting tax benefits have a positive influence on firm value.

The relationship between accrual inefficiency in analysts' forecasts and analyst following, analysts' forecasting ability, and the relative magnitude of discretionary accruals is analyzed. Results aid in answering two research questions: (1) whether the accrual mispricing anomaly has economic substance or is merely an artifact of missing risk factors; and (2) whether the observed financial analysts' response to accounting accruals is consistent with the accrual mispricing anomaly or its origins lie elsewhere. Sloan [1996] provides evidence of abnormal market returns correlated with the prior year's accrual and cash flow components of earnings. Few possible explanations are presented in the literature for the observed phenomenon: the Naive Investor Hypothesis suggests that market participants "fixate" on earnings figures and erroneously estimate earnings persistence without regard for the impact of accruals. Alternatively there are concerns that the observed abnormal returns are merely compensation for unaccounted risk factors and thus do not constitute a departure from market efficiency. Results of this study provide evidence of accrual misinterpretation among financial analysts consistent with the pattern of mispricing that is observed in the market. This conclusion supports the view of accrual mispricing as a true market anomaly. Moreover, the naive investor hypothesis is supported by the evidence that analysts' response to accounting accruals improves with their forecasting ability and that greater analyst following leads to consensus forecasts being more efficient.

The lock-in effect discourages investors from switching investments in a portfolio that is no longer optimal. It is possible, however, that the negative impact of the lock-in effect on gain realizations can be offset by the positive impact of capital gains taxes on the demand for risky assets when losses are not subject to special restrictions. While previous studies have examined the impact of the lock-in effect of current capital gains taxes on realization behavior (e.g., Feldstein, Slemrod, and Yitzhaki, 1980; Burman and Randolph, 1994) and the impact of the variance-reduction effect of future capital gains taxes on the demand for risky assets (e.g., Mossin, 1968; Stiglitz, 1969), there is little extant research that analyzes the impact of both current and future capital gains taxes on portfolio composition. This dissertation examines the impact of capital gains taxation on individual investor behavior in a proportional income tax regime. I study this problem using two different approaches. First, I develop a single period general equilibrium model to derive propositions regarding the impact of capital gains taxation on portfolio diversification. Second, I examine the impact of capital gains taxation in a multiperiod experimental asset market similar to the "bubbles" markets described in Smith, Suchanek, and Williams (1988). The experimental results show that realization behavior in markets with constant rate capital gains taxation are not significantly different than that in tax-free markets. Moreover, both analytical and experimental results indicate that capital gains taxation has a significant impact on prices and realization behavior when the tax rate on current capital gains is different than the expected tax rate on future capital gains. These results are consistent with evidence presented in Burman and Randolph (1994) which suggest that the inverse relationship between gain realizations and the capital gains tax rate is driven by temporary differences between current and future tax rates rather than the permanent level of the capital gains tax rate.

<p>Bank lending processes and lending relationships involve two aspects, the provision of liquidity via lines of credit and the production of information via monitoring. To access the existing credit line, a borrower must be in compliance with financial covenants. When violations occur, access becomes conditional upon the bank&rsquo;s willingness to accommodate the customer. The bank values its reputation as an accommodating lender and views a decision regarding credit line access restrictions as a trade-off between reputational and financial capital. Since imposing restrictions on a more loyal borrower causes greater reputational damage, a bank&rsquo;s &ldquo;willingness&rdquo; to accommodate increases in the strength of the relationship with its borrower. This is the first channel through which relationships have effect. To the extent that lending also involves monitoring, relationships allow a bank to build an exploitable information advantage. This is the second channel. Most credit lines are monitored, making it difficult to isolate the effects of these two channels. I identify commercial paper backup lines of credit as loans that provide liquidity, but do not involve information production and use them to construct two measures of relationship strength that capture the extent of bank&rsquo;s willingness to provide liquidity (<i>T-intensity </i>) and the bank&rsquo;s information advantage (<i>I-intensity </i>). To make sharper inferences concerning the effect of willingness, I control for a bank&rsquo;s reliance on core deposits as a measure of &ldquo;ability&rdquo; to provide liquidity. I find that loan spreads decrease in <i>T-intensity </i> for firms without public equity. Thus, for such firms, credit lines have liquidity insurance value and it increases with relationship strength. I also find that loan spreads increase in <i>I-intensity</i> for all firms, suggesting that banks are successful at exploiting their information advantage (i.e. &ldquo;holding up&rdquo; borrowers). My findings imply that for relatively opaque borrowers, relationships have value even in the absence of private information production. </p>

<p> This research seeks to document if differences in perceptions of small business creditworthiness and lending practices of credit union and commercial lenders exist. This study applied a quantitative method to answer five questions: (1)How do small business owners perceive commercial lenders? (2)How do small business owners perceive credit union lenders? (3)How do commercial banks perceive small businesses? (4)How do credit unions perceive small businesses? (5)What are the differences in the perceptions of small businesses, commercial banks, and credit unions? The study used a quantitative survey instrument to gather data and the data was compared and contrasted among groups (Fitzgerald &amp; Rumrill, 2004). The chi-squared test of differences in probabilities and the goodness of fit test were applied (Figure 2A) to determine if there were differences in probabilities between answers.</p><p> The results of this study are significant to small business and banking leaders by helping to define how lenders&rsquo; and small businesses&rsquo; perceptions affect the differences in loan delinquency rates between commercial lenders and credit unions lenders and by offering new insight into how loan delinquency rates can be reduced. The results also pointed to inherent perceptions of small business owners and lenders that might contribute to the root causes of loan defaults and delinquencies. The results provided information upon which small business owners and financial institution loan officers might act in order to understand how to better manage loans and to reduce the rate of loan delinquency.</p>

<p> Research has shown the recent worldwide economic crises that began in 2007 was partially initiated from lending practices widely utilized in the subprime mortgage industry. The purpose of this study was to gain a greater understanding of the loan officers' perspective on how subprime lending practices contributed to increased foreclosures, the devaluation of housing prices, and the impact of the recent governmental regulations on mortgage lending. Qualitative phenomenology was utilized in this study to explore lived-experiences and meaning loan officers have giving to the rise and fall of the subprime mortgage phenomenon. The participants in this study were contacted via e-mail through data obtain from the National Mortgage Licensing System (NMLS) website. Twenty-two in-person open-ended interviews were conducted with actively licensed loan officers who had been in the mortgage industry for a minimum of 10 years. The results of this phenomenological study inquiry identified several variables that appear to shape loan officers' attitudes and beliefs on the future of the mortgage industry. Eight main influential themes were identified by the participants which included: (1) The Dodd-Frank Act, (2) decreased income, (3) increased qualification standards, (4) decreased loan programs, (5) increased confusion and consumer frustration, (6) increased paperwork, (7) decreased competition, and (8) fear of future restrictive legislation. The findings of this study demonstrate the significance and long-term impact of subprime lending practices on the future of the mortgage industry.</p>