Ownership structure has been recognized as an important topic in corporate finance because of the influential relationship between firm managers and shareholders (agency theory). This relationship has an effect on the decision-making process in the firm, which has an impact on firm characteristics such as firm value. Because going public leads to changes in stock ownership structure, which could affect the firm's value and future performance, pre-IPO private firms provide a good case study of ownership structure This study has two objectives. The first is to initiate an inquiry into which firm characteristics are associated with management ownership and the participation of external institutions and corporations---specifically venture capitalists (VCs) and equity alliances (EAs)---in the ownership structure of pre-IPO private firms. My second objective is to examine the impact of ownership structure on the key IPO variables: underpricing, offer price, offer size, revision, turnover, and underwriter reputation The determinants of VC ownership participation, given the pre-IPO firm's characteristics, can be summarized as follows. VC-baked firms tend to be younger, smaller, and high-growth firms. They characteristically have negative earnings and low profitability, low levels of debt, and higher current ratios. VC- and EA-backed firms are similar in age, level of sales, level of debt, profitability, and R&D and S&M expenses. However, the results for EA are less strong than for VC-backed firms, indicating that the profile of firms that receive VC investments is more defined than that in firms that receive EA backing Finally, VC and EA investments have a positive impact on the offering process. The offer size is smaller for VC- and EA-backed firms than for other IPOs. The offer price and underwriter reputation is higher for VC-backed and for EA-backed firms compared with other firms. Revision is higher for VC- and EA-backed firms, suggesting that the information disclosure during the pre-market is high for these firms. Underpricing is larger for VC- and EA-backed firms, suggesting that underpricing is due primarily to market activity / acase@tulane.edu

The fundamental valuation process uses financial and operational information to assess future earnings and risk to arrive at a conclusion on the pricing of a risky investment project. We show that the market participants use this fundamental valuation process to assess the premium paid by acquirers to target firms following disciplinary takeovers. Using changes in Value Line forecasts before and after mergers announcements as a proxy for the investors' information about the fundamental values of the target firm, we show that this valuation plays a significant role in the investors' assessment of the target shareholders premium following the takeover announcements, after incorporating the bidders takeover motive as an integral part of the valuation process. Analysis of the target firm operating performance provides corroborative evidence of an inefficient target management The second part of the dissertation identifies and estimates the potential tax benefits as sources of gains in Mergers. First, we isolate the tax benefits from interest deductions associated with an increase in the debt of the combined firm after the merger. The results seem to suggest that these tax benefits are mainly associated with mergers that use either cash or both cash and stock as means of transaction. Mergers that use strictly stock as means of exchange are not followed with any significant leverage increase either immediately or in the next five years. The increase in debt could be either because of an increase in the combined firms' debt capacity following a merger or optimally utilizing any under utilized pre merger debt. Second, the revaluation of the target firms' asset at the acquisition price (stepped up basis) allows the acquirer with the option of increased depreciation deductions. Third, the net value of the tax benefits for the combined firm from net operating loss carryforwards and investment tax credits associated with tax free mergers. We estimate these potential tax benefits. Additionally, we also control for synergy, an increase in the post-merger operating performance (similar to Healy et. al.(1991)). Finally we show that these benefits are able to explain the wealth gains associated with mergers around the announcement dates, after controlling for increases in post-merger operating performance / acase@tulane.edu

The purpose of this dissertation is to examine the causes and consequences of foreign takeovers in the United States. In particular, I try to find whether real sector imperfections motivate foreign takeovers For a sample of 96 foreign takeover targets (taken over during the period 1975-1987), I empirically study the foreign takeovers in three stages: (i) the pre-takeover stage, (ii) the transaction stage, and (iii) the post-takeover stage The real sector imperfections model of foreign takeovers predicts that the motives of foreign takeovers in the United States are (a) to enter or expand the United States' market, and (b) to obtain synergistic gains by acquiring an appropriate target The empirical findings confirms the contention that foreign bidders are motivated by real sector imperfections in the United States. In particular, the findings in the pre-takeover stage show that foreign bidders acquire firms in markets characterized by high degree of marketing skills, as measured by the advertisement expenditure. Also, more takeover activity is targeted in industries which themselves make high level of foreign direct investment implying that the bidders use takeovers as a vehicle of quick entry to counteract rival firms' moves. The surprising result is that takeovers do not take place in high technology (as measured by R & D expenditures) industries. Another result pertaining to the target firms' industries shows that these takeovers take place in more mature, low growth industries. All these results, however, lose their significance when compensation for choice based sampling is made. The foreign targets, on an average, are smaller than the non-targets. The foreign bidders takeover firms with very low levels of intangible assets, as measured by the market-to-book value The findings of takeover-stage show that the wealth effect on the announcement of a takeover is significantly higher for foreign targets than for domestic targets. Also, foreign bidders pay a significantly higher premium for targets whose operations are related to their own. The results weakly indicate that the foreign bidders pay a relatively higher premium for firms with lower levels of intangible assets, showing their preference for such firms Finally, the findings of the post-takeover stage show that the foreign bidders use the targets as a base for expansion through new investments in forty cases. The bidders also divest a substantial portion of assets in thirty-one cases. Most of these divestitures are probably taken to correct past managerial mistakes. In twenty-two cases the targets report changes in top management positions. Finally, although, fifteen firms report post-takeover layoffs and investment cuts, the magnitude of such changes is very small The direct evidence on foreign takeover activity shows that foreign takeovers are good for United States and that there is no reason to restrict them / acase@tulane.edu

This dissertation presents a study of the nature of the formation of expectations for, and empirical patterns of, the Deutsche Mark/dollar and Yen/dollar exchange rates for the time period of July 1976 to June 1986. A discussion of the interdependent characteristics of monetary policy formation and institutional aspects of the central banks of the United States, West Germany, and Japan follows, with the purpose of characterizing policy interaction effects on formation of expectations in the 1976-1980 and 1980-85 subperiods--prior to, and after, the inception of significant changes in monetary policies in each of the three countries. / The statistical studies produce conflicting results, but the strongest indication is for behavior of exchange rate levels consistent with rational expectation theories of market efficiency for each of the two subperiods, but not for the full period. In particular, there is indication of serial correlation in the residuals for the full period tests. Variance ratio tests for trend reversion suggest persistence of returns which increase by a degree less than proportional to the increase in length of lag period, suggesting reversion to a central value. / Source: Dissertation Abstracts International, Volume: 52-05, Section: A, page: 1836. / Major Professor: George Macesich. / Thesis (Ph.D.)--The Florida State University, 1991.

Many of the relatively large number of transitions to more democratic political systems in Third World countries during the 1980s were anomalies for important theories of regime transition, because they occurred during times of economic difficulties and increased dependence by poor countries on richer, industrialized states. Modernization theory, for example, would lead us to expect that economic growth is necessary for the emergence of democracy, while dependency theory stipulates that increased reliance by poor countries on investment from multinational corporations fosters dictatorial regimes that create economic environments attractive to those corporations. At least some of the anomalies might be accounted for by a model that emphasizes the liberalizing impact of economic restructuring programs instituted by the International Monetary Fund and the World Bank, especially in those countries with debt-servicing difficulties that made them more vulnerable to that impact. Analyses of data on regime transitions in the 1980s indicate that highly indebted countries committed to economic stabilization under agreements signed with either official multilateral agencies or commercial banks were more likely to democratize in the 1980s. / Source: Dissertation Abstracts International, Volume: 52-05, Section: A, page: 1883. / Major Professor: James Lee Ray. / Thesis (Ph.D.)--The Florida State University, 1991.

This dissertation provides an investigation of the earnings surprise associated with the quarterly earnings announcement. The examination of a wide variety of forecast models allows insight into the ability of these models to capture the earnings expectations of the market. / The analysis addresses two issues. The first issue is the value of the earnings surprise. Among the forecasts models considered in the examination of forecast accuracy are: (1) a random walk model; (2) the standardized unexpected earnings (SUE) model; (3) three autoregressive integrated moving average (ARIMA) models; (4) an autoregressive conditional heteroskedasticity (ARCH) model; (5) a generalized autoregressive conditional heteroskedasticity (GARCH) model; (6) a price-based model; and (7) four analyst models. / The ARIMA models produce more accurate statistical forecasts than the random walk, SUE, ARCH, GARCH, or price-based models. Further, the analysts' forecasts are more accurate than any statistical alternative. The broader set of information considered by analysts gives them an advantage over statistical models. Further, the ability of the analysts to incorporate recent information gives them a timing advantage. / The second issue is the market response to earnings surprise, where surprise is defined by the different forecast models. The correlation between the forecast errors of the different models and the announcement period response provides evidence of the model that best captures the earnings expectation. The highest correlation is associated with the forecast errors of the most recent analyst forecasts. / Further analysis of the market response forms portfolios based on the most positive and negative earnings surprise securities. This provides insight into the value of the earnings announcement. Positive announcement period abnormal returns are associated with the positive surprise portfolios. In contrast to previous work, the abnormal returns associated with the negative surprise portfolios seldom differ from zero. With respect to the post-announcement period, positive abnormal returns are associated with both the positive and negative earnings surprise portfolios. This anomalous behavior is inconsistent with previous findings. Regardless, the introduction of round-trip transaction costs may eliminate any economic motivation to trade on this information. / Source: Dissertation Abstracts International, Volume: 52-06, Section: A, page: 2230. / Major Professor: Pamela P. Peterson. / Thesis (Ph.D.)--The Florida State University, 1991.

With panel data from 1981 to 2008 covering 105 countries, this paper investigates the impact of explicit deposit insurance generosity on financial systemic risk. The deposit insurance generosity is measured by the effective deposit coverage limit to GDP per capita ratio. While preliminary results from basic regressions suggest that the correlation between deposit coverage generosity and systemic risk might be U-shaped---an appropriate increase in coverage generosity can reduce systemic risk by building public confidence in the banking system, but may increase systemic risk when policies become too generous, because of moral hazard---this is yet to be confirmed by robust and more appropriate probit analysis. This preliminary finding suggests that the tipping points of effective coverage ratio where explicit deposit insurance systems start to increase systemic risk vary by country groups, and by whether time-fixed effect is controlled for. Further research is needed for confirming the correlation between coverage generosity and systemic risk.

<p>The central puzzles in financial economics commonly include</p><p>violations of the expectations hypotheses, predictability of excess returns, and the levels and volatilities of nominal bond yields, in addition to well-known equity premium and the risk-free rate puzzles.</p><p>Equally surprising is the recent evidence on large moves in asset prices, and the over-pricing of the out-of-the-money index put options relative to standard models. In this work, I argue that the long-run risks type model can successfully explain these features of financial markets. I present robust empirical evidence which supports the main economic channels in the model. Finally, I develop econometric methods to estimate and test the model, and find that it delivers plausible preference and model parameters and provides a good fit to the asset-price and macroeconomic data.</p><p>In the first chapter, which is co-authored with Ravi Bansal, we present a long-run risks based equilibrium model that can quantitatively explain the violations of expectations hypotheses and predictability of returns in bond and currency markets. The key ingredients of the model include a low-frequency predictable component in consumption, time-varying consumption volatility and investor's preferences for early resolution of uncertainty. In this model, varying consumption volatility in the presence of the predictable consumption component leads to appropriate variation in bond yields and the risk premia to provide an explanation for the puzzling violations of the expectations hypothesis. Using domestic and foreign consumption and asset markets data we provide direct empirical support for the economic channels highlighted in the paper.</p><p>In the second chapter, co-authored with Ravi Bansal, we develop a general equilibrium model in which income and dividends are smooth, but asset prices are subject to large moves (jumps). A prominent feature of the model is that the optimal decision of investors to learn the unobserved state triggers large asset-price jumps. We show that the learning choice is critically determined by preference parameters and the conditional volatility of income process. An important prediction of the model is that income volatility predicts future jumps, while the variation in the level of income does not. We find that indeed in the data large moves in returns are predicted by consumption volatility, but not by the changes in the consumption level. In numerical calibrations, we show that the model can quantitatively capture these novel features of the data.</p><p>In the third chapter, I present a long-run risks type model where consumption shocks are Gaussian, and the agent learns about unobserved expected growth from the cross-section of signals. The uncertainty about expected growth (confidence measure), as in the data, is time-varying and subject to jump-like risks. I show that the confidence jump risk channel can quantitatively account for the option price puzzles and large moves in asset prices, without hard-wiring jumps into consumption. Based on two estimation approaches, the model provides a good fit to the option price, confidence measure, returns and consumption data, at the plausible preference and model parameter values.</p> / Dissertation

This dissertation consists of two chapters. Chapter 1 examines the ex-ante optimality of repricing and rescission of executive stock options while considering dilution effects and the tax effects of new accounting rules associated with repricing and rescission. Traditional repricing lowers the exercise price of outstanding options to match the declined market value of the stock. Rescission allows employees to cancel already-exercised options when share prices fall, which was not an issue until 2000 when the stock market plummeted. To my best knowledge, this study is the first research on examining the possible optimality of traditional repricing and rescission while considering the economic impact of changing accounting rules in an ex-ante contracting setting. Chapter 2 examines the ex-ante optimality of repricing alternatives and derives an optimal repricing-triggered policy, which specify how deeply the options are under water before repricing takes place. In practice, traditional repricing practices have become obsolete since new accounting rules took effect in July 2000. To avoid associated variable accounting charges that cause uncertainty in future reported earnings, companies have tried several repricing alternatives as solutions to rescuing underwater options. This study not only justifies the occurrence of some repricing alternatives but also quantifies the impact of the marking-to-market feature imbedded in the new accounting rules.

This dissertation is a compilation of three studies that seek to extend the reaches of agency theory. In the first study, data on California banks from 1979-1987 were used to test the effect that board strength has on the acquisition and subsequent write-off of problem loans. As expected stronger boards incurred fewer loan delinquencies and loan losses. Board strength was also associated with smaller increases in loan write-offs when management turned over but larger increases when board members turned over. This suggests that board members are susceptible to escalating their level of commitment in the same way that managers are, implying that board members are also self-serving. Using the same data set, the second study examined the relationship between management ownership in banks and corporate performance and risk-taking. In support of the agency argument, increased management ownership led to higher levels of ROA and loan losses in the banks. The function was diminishing but monotonic. Using data gathered from private colleges and universities, the third study focused attention on agency in the not-for-profit sector by examining the relationship between board of director and presidential demography and school performance as measured by institutional revenue and gifts. The results provide mixed support and direction for the extension of agency models to the not-for-profit sector. Board strength, as measured by tenure and functional background, and presidential tenure, predicted better performance. These findings suggest that while boards play a significant role in performance of not-for-profits, their focus is on facilitating access to resources from the external environment rather than in monitoring management.