Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As

Size: px
Start display at page:

Download "Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As"

Transcription

1 Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As Zhenxu Tong * University of Exeter Jian Liu ** University of Exeter This draft: August 2016 Abstract We examine how the performance of M&As is affected by the source of financing between two forms of corporate liquidity: bank lines of credit and corporate cash holdings. We develop two hypotheses based on agency problem and asymmetric information. We find that both the announcement return and the change in operating performance are higher for the M&As entirely financed by bank lines of credit. We also find that an acquirer is more likely to use bank lines of credit as the source of financing when institutional ownership is higher. Moreover, we find that the M&As entirely financed by bank lines of credit are associated a lower level of acquisition premium. We conclude that the findings are consistent with the agency hypothesis. JEL Classification: G32; G34 Keywords: Sources of financing; Corporate liquidity; Mergers and acquisitions * Corresponding author. Address: Xfi Centre for Finance & Investment, School of Business, University of Exeter, Rennes Drive, Exeter EX4 4ST, United Kingdom. Telephone: address: ** Address: Xfi Centre for Finance & Investment, School of Business, University of Exeter, Rennes Drive, Exeter EX4 4ST, United Kingdom. Telephone: address: 1

2 1. Introduction Bank lines of credit and corporate cash holdings are two important forms of corporate liquidity. Previous literature shows that firms hold a large fraction of corporate liquidity to total assets. For example, Bates, Kahle and Stulz (2009) find that the mean of the ratio of cash to total assets is 23.2% for US firms in Sufi (2009) finds that 85% of the firms in his sample have bank lines of credit, and that the mean of the ratio of total lines of credit to total assets is 16%. Lins, Servaes and Tufano (2010) conduct a survey on CFOs in 29 countries and find that bank lines of credit accounts for 15% of total assets. In our paper, we examine how the performance of M&As is affected by the sources of financing between corporate cash holdings and bank lines of credit. We develop two competing hypotheses based on agency problem and asymmetric information. First, since bank lines of credit are subject to the monitoring by banks, this can reduce the agency problem. We expect that the M&As financed by bank lines of credit will outperform the M&As financed by corporate cash holdings. Second, corporate cash holdings is an internal source of financing, while bank lines of credit is an external source of financing. Since the cost of financing increases with the degree of asymmetric information, we expect that the M&As financed by bank lines of credit will underperform the M&As financed by corporate cash holdings. We construct a sample of 723 M&As from 1985 and We find that both the announcement return and the change in operating performance are higher for the M&As entirely financed by bank lines of credit. We also find that an acquirer is more likely to use bank lines of credit as the source of financing when institutional ownership is higher. Moreover, we find that the M&As entirely financed by bank lines of credit are associated a lower level of acquisition premium. We further divide the sample into sub-groups based on corporate governance. We find that when bank lines of credit are used as source of financing, both the announcement return and the change in operating performance are higher for the sub-group of 2

3 firms with poorer corporate governance, and that the acquisition premium is lower for such a sub-group of firms. The results are consistent with the interpretation that the performance of M&As is higher when bank lines of credit are used as a source of financing. We conclude that this is consistent with the agency hypothesis. We contribute to the literature in the following two directions. First, we complement the literature on the agency perspective about bank lines of credit. Previous literature has focused on examining how the agency problem affects the level of bank lines of credit. For example, Yun (2009) finds that after a change in takeover legislation, firms increase the fraction of corporate liquidity held in the form of corporate cash holdings relative to bank lines of credit. Sufi (2009) finds that firms with low cash flow are less likely to obtain a line of credit, and argue that firms must maintain high cash flow to remain compliant with covenants associate with bank lines of credit. Our paper differs from the previous literature in that we examine the performance brought by bank lines of credit. To our knowledge, only Nini, Smith and Sufi (2012) examine a sample of lines of credit loans, and find that a firm s operating and stock price performance improve following a violation of covenant, which implies that banks play an important governance role and their actions benefit shareholders. We differ from Nini et al. (2012) in that we conduct the research in the setting of M&As. Second, our paper contributes to the limited existing literature on how the source of financing affects the performance of M&As. To our knowledge, only two papers in the literature have examined the relation between the source of financing and the performance of M&As. Bharadwaj and Shivdasani (2003) find that tender offered that are financed by banks have better performance. Our paper extends Bharadwaj and Shivdasani (2003) in that we conduct the analysis with general M&As instead of tender offers only. Martynova and Renneboog (2009) find that acquisitions financed with internally generated funds 3

4 underperform those financed with debts. Our paper extends Martynova and Renneboog (2009) in that we focus on bank lines of credit which is an important source of corporate liquidity instead of the debts in general. The paper is organized as follows. Section 2 develops the hypotheses. Section 3 describes the data and the variables. Section 4 presents the results. Section 5 concludes the paper. 2. Hypotheses We develop the hypotheses in this section Agency problem While managers can use corporate cash holding in a discretionary way, bank lines of credit are subject to the monitoring by banks. This difference between the two forms of corporate liquidity implies an important role of the agency problem in this research setting. In terms of corporate cash holdings, for example, Harford (1999) finds that cash-rich firms are more likely to make value-decreasing acquisitions. This is consistent with the free cash flow theory proposed by Jensen (1986). In term of bank lines of credit, for example, Sufi (2009) finds that firms must maintain high cash flow to remain compliant with covenants associate with bank lines of credit, and that banks restrict firm access to credit facilities in response to covenant violations. Yun (2009) finds that firms increases the fraction of corporate liquidity held in the form of corporate cash holdings relative to bank lines of credit when the threat of takeover weakens. Since bank lines of credit reduce the agency problem, we expect that the performance will be higher for the M&As financed by bank lines of credit. Therefore, we have the following hypothesis. Hypothesis 1: The M&As financed by bank lines of credit outperform the M&As financed by corporate cash holdings from the perspective of agency problem. 4

5 2.2. Information asymmetry Myers and Majluf (1984) propose a pecking order for the sources of financing based on asymmetric information. They argue that the internal source of financing, such as corporate cash holding, is a cheapest source of financing. The financing cost increases when firms use debts, and equity is a most costly source of financing. From the perspective of asymmetric information, it is cheaper for firms to finance M&As by using corporate cash holdings than bank lines of credit, because bank lines of credit are an external source of financing and are associated with a higher level of asymmetric information. We expect that the performance will be lower for the M&As financed by bank lines of credit because of a higher financing cost. Therefore, we have the following hypothesis. Hypothesis 2: The M&As financed by bank lines of credit underperform the M&As financed by corporate cash holdings from the perspective of asymmetric information. 3. Data and variables In this section, we describe the data and variables Data We get the data from the following sources. We collect financial data from Compustat database and stock return data from CRSP. We obtain the U.S. data on mergers and acquisitions from Thomson One Banker database. We manually collect the data of bank lines of credit from 10-K annual reports. We collect the institutional ownership data from Thomson Financial/Institutional database and insider ownership data from the proxy statements. In our sample, the acquirers are public firms because we use stock market data to calculate a measure of firm performance. The targets can be either public firms or private firms. Our sample period is from 1985 to We use the following screening procedures. We choose the M&As whose sources of financing are identified by Thomson One Banker database 5

6 as bank lines of credit, or corporate cash holdings, or a mix of the two sources. We exclude financial firms (SIC codes between 6000 and 6999). We exclude the M&As whose deal value is less than one million dollars. We also exclude the observations with incomplete data. After the screening procedures, we obtain a final sample of 723 M&A events. Among them, 271 M&As are entirely financed by corporate cash holdings. 308 M&As are entirely financed by bank lines of credit. 144 M&As are financed by a mix of bank lines of credit and corporate cash holdings Variables Sources of financing The sources of financing for M&As are identified in Thomson One Banker database. For example, the database records an acquisition made by Actuant Corp with the announcement date on 3 March The source of financing is recorded as Line of Credit, and its description is The transaction was financed through Actuant Corp's revolving credit facility. For another example, the database records an acquisition made by Select Comfort Corp with the announcement date on 17 January The source of financing is recorded as Corporate Funds, and its description is The transaction was financed through Select Comfort Corps existing cash reserves. We construct two dummy variables to indicate the sources of financing for M&As. Bank Lines of Credit Dummy equals ones if an M&A is entirely financed by bank lines of credit, and equals zero otherwise. Mixed Sources Dummy equals one if an M&A is financed by mixed sources of bank lines of credit and corporate cash holdings, and equals zero otherwise Announcement return We use an acquirer s announcement return, which is calculated as the cumulative abnormal return over days ( 3, +3) around the announcement date, as a measure of the stock market performance of M&As. The cumulative abnormal return is calculated using the market model 6

7 with the CRSP equally weighted index as the market return. To estimate the market model, we use an acquirer s daily return and the return on the CRSP equally weighted index over days -200 to -20, where day 0 is the event date Change in operating performance We use the change in ROA as a measure of the operating performance of M&As. ROA is the ratio of EBIT to non-cash assets. We calculate the Change in ROA from year t-1 to year t Net change in operating performance We also use the net change in ROA as another measure of the operating performance of M&As. Net Change in ROA is the difference between an acquirer s change in ROA and its matched comparable firm s change in ROA from year t-1 to year t+1. We construct a sample of comparable firms with propensity score matching. We match each acquirer firm to a non-acquirer firm within the same industry based on 2-digit SIC code, requiring that the non-acquirer firm has a minimum difference in propensity score based on firm size, market-tobook ratio, cash flow, leverage, tangibility, capital expenditure, R&D, dividends and cash flow volatility. We provide the details about the propensity score matching in Appendix A Institutional ownership We use institutional ownership as a measure of corporate governance. Institutional Ownership is the ratio of shares owned by institutional investors to the total shares outstanding at the end of a quarter prior to the announcement. Block is a dummy variable that equals one if there exists a block institutional ownership which exceeds 5% of the total shares outstanding, and equals zero otherwise Deviation from optimal insider ownership We use another measure of corporate governance based on insider ownership. Since the endogeneity problem has been discussed extensively in the literature about managerial 7

8 ownership, we follow Tong (2008) and construct a measure based on the deviation from optimal insider ownership. We first run a benchmark regression to get the determinants of insider ownership. Then we define the variable Deviation from Optimal Insider Ownership as the absolute value of the residuals in the benchmark regression. A higher level of Deviation from Optimal Insider Ownership indicates a lower level of corporate governance. We provide the details about the benchmark regression in Appendix B Control variables We use the following control variables. Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Unused Lines of Credit is the ratio of unused lines of credit to assets (e.g., Sufi, 2009). Cash is the ratio of cash and marketable securities to non-cash assets, where non-cash assets are total assets less corporate cash holdings. Size is the logarithm of non-cash assets. Cash Flow is the ratio of income before extraordinary items to non-cash assets. Market-to-book ratio is defined as the market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debts to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditures to non-cash assets. R&D is the ratio of research and development expenses to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of Cash Flow in the prior 5 years. Table 1 reports univariate statistics. 4. Results We report the results in this section. First, we report the univariate analysis on the announcement return. Next, we examine how the sources of financing between bank lines of credit and corporate cash holdings affect the announcement return and the change in operating performance. Then we demonstrate the likelihood of an acquirer s choice between bank lines 8

9 of credit and corporate cash holdings as the source of financing. Moreover, we report the effect of sources of financing on acquisition premium. Then we report the results of the sub-group analysis and the robustness checks Univariate analysis Table 2 shows the univariate analysis on acquirers announcement return across three groups. CAR (-3, +3) indicates the cumulative abnormal return over days ( 3, +3) around the announcement date. The first row shows that the mean of announcement return for the M&As entirely financed by bank lines of credit (corporate cash holdings) is (0.002). A t-test shows that the difference is significant between the two groups. The second row shows that the mean of announcement return for the M&As financed by a mixed source of financing is not significantly different from the mean of announcement return for the group of acquirers entirely financed by corporate cash holdings. The third row compares the M&As entirely financed by bank lines of credit with the M&As financed by a mixed source of financing. The difference of the mean of announcement return between the two groups is significant. The results support the interpretation that the M&As entirely financed by bank lines of credit have the highest announcement return. This is consistent with the agency hypothesis Regression Table 3 reports the regression. The dependent variable is CAR (-3, +3). The coefficient of Bank Lines of Credit Dummy is (p-value = 0.02). It implies that on average the M&As entirely financed by bank lines of credit has an additional 2% announcement return than the M&As entirely financed by corporate cash holdings. We also find the coefficient of Mixed Sources Dummy is (p-value = 0.69). The results are consistent with the interpretation that the M&As entirely financed by bank lines of credit have the best stock market performance. This is consistent with the agency hypothesis. 9

10 4.3. Change in operating performance Table 4 reports the results on the change in operating performance. The dependent variable in Column 1 is the Change in ROA from year t-1 to year t+1. 1 The coefficient of Bank Lines of Credit dummy is (p-value = 0.08), indicating that the M&As entirely financed by bank lines of credit have a higher change in operating performance than the M&As entirely financed by corporate cash holdings. The coefficient of Mixed Sources Dummy is (p-value = 0.05). The dependent variable of the second column is the Net Change in ROA, which is the difference between the change in ROA of the event firm and the change in ROA of the comparable firm. The coefficient of Bank Lines of Credit Dummy is (p-value = 0.05). The coefficient of Mixed Sources Dummy is (p-value = 0.40). The results in Table 4 are consistent with the interpretation that the M&As entirely financed by bank lines of credit have the best operating performance. This is consistent with the agency hypothesis The choice of the source of financing We use a multinomial logistic regression to estimate the likelihood of an acquirer s choice between bank lines of credit and corporate cash holdings as the source of financing. We expect that firms with better corporate governance are more likely to choose bank lines of credit as the source of financing, because they are more likely to meet the monitoring requirements of the banks. In the multinomial logistic regression, the dependent variable is categorical. It equals 0 if an M&A is entirely financed by corporate cash holdings, equals 1 if an M&A is financed by a mixed sources of financing, and equals 2 if an M&A is entirely financed by bank lines of credit. 1 Since the dependent variable requires the availability of the data from year t-1 to year t+1, the sample size is reduced to 667 M&As in this table. 10

11 We use the variables at the fiscal year end of the year t-1 as the independent variables. They include corporate cash holdings and unused lines of credit 2 as the sources of financing available to a firm. They also include the variables on corporate governance, such as institutional ownership and the deviation from optimal insider ownership. We also add other control variables such as size, cash flow and so on. We report the results in Table 5. 3 Column 1 shows the likelihood of an acquirer s choice of the source of financing between bank lines of credit and corporate cash holdings. The coefficient of Cash is (p-value = 0.01), suggesting that firms with higher level of cash are less likely to use bank lines of credit as the source of financing for M&As. The coefficient of Unused Lines of Credit is (p-value = 0.01), suggesting that firms with higher level of unused lines of credit are more likely to use bank lines of credit as the source of financing for M&As. We also examine whether corporate governance affects an acquirer s choice of the source of financing. Column 1 shows that the coefficient of Institutional Ownership is (p-value = 0.06). It implies that a firm with higher institutional ownership is more likely to choose bank lines of credit than corporate cash holdings as the source of financing. Moreover, we find similar results in Column 2 that an acquirer with higher institutional ownership is more likely to choose a mixed source of financing than corporate cash holdings as the only source of financing. We further examine the impact of corporate governance by adding Deviations from Optimal Insider Ownership in the regressions in Column 3 and Column 4. The variable 2 We get similar result when we use total lines of credit in the regressions. 3 Since our data of unused lines of credit starts from 1995 when the 10-K statements are available online, the sample size is reduced to 504 M&As in Column 1 and Column 2 in this table. Among them, 191 M&As are entirely financed by corporate cash holdings, 93 M&As are financed by a mix of bank lines of credit and corporate cash holdings, and 220 M&As are entirely financed by bank lines of credit. Similarly, since our data of insider ownership also starts from 1995 when the proxy statements are available online, the sample size is reduced to 424 M&As in Column 3 and Column 4 in this table. Among them, 167 M&As are entirely financed by corporate cash holdings, 82 M&As are financed by a mix of bank lines of credit and corporate cash holdings, and 175 M&As are entirely financed by bank lines of credit. 11

12 Institutional Ownership is still significant in the two columns, though the coefficient of variable Deviations from Optimal Insider Ownership is not significant. Therefore, some evidence in Table 5 supports the interpretation that firms with better corporate governance are more likely to choose bank lines of credit as a source of financing for M&As. This is consistent with the agency hypothesis Acquisition premium We examine the impact of the source of financing on acquisition premium. From the agency perspective, a manager is more likely to overpay for the M&As if there is more agency problem. Therefore, we expect that the acquisition premium is lower for the M&As financed by bank lines of credit than the M&As financed by corporate cash holdings. We collect the data of acquisition premium from Thomson One Banker database. There are three measures of acquisition premium. They are the ratios of the offer price to the target share price one day, or one week, or four weeks prior to the announcement of M&As. Table 6 shows the results. 4 Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.08). It implies that M&As entirely financed by bank lines of credit are associated with lower acquisition premium. The coefficient of Mixed Sources Dummy is (p-value = 0.26). We find a similar pattern in Column 2 and Column 3 when we measure the acquisition premium with different time intervals. Therefore, the results in Table 6 support the interpretation that a manager pay less acquisition premium when the source of financing is bank lines of credit. This is consistent with the agency hypothesis Sub-group analysis on corporate governance We divide the sample into sub-groups and further examine the impact of corporate governance. 4 There are 169 M&As in our sample whose data of acquisition premium are available in Thomson One Bank database. 12

13 Table 7 reports the results when we divide the sample into sub-groups based on whether there is a block holder of institutional ownership. Panel A shows the results for the announcement return. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.08) when there is not a block holder, and Column 2 shows that the coefficient is (p-value = 0.37) when there is a block holder. Panel B of Table 7 shows the results about the Net Change in ROA. We find a similar pattern. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.02) when there is not a block holder, and Column 2 shows that the coefficient is (p-value = 0.44) when there is a block holder. Table 8 reports the results when we divide the sample into sub-groups based on the deviation from optimal insider ownership 5. A higher (lower) level of deviation from optimal insider ownership indicate a lower (higher) level of corporate governance. Panel A shows the results for the announcement return. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.03) when there is a higher level of deviation from optimal insider ownership, and Column 2 shows that the coefficient is (p-value = 0.63) when there is a lower level of deviation from optimal insider ownership. Panel B of Table 8 shows the results about the Net Change in ROA. We find a similar pattern. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.07) when there is a higher level of deviation from optimal insider ownership, and Column 2 shows that the coefficient is (p-value = 0.61) when there is a lower level of deviation from optimal insider ownership. The results in Table 7 and Table 8 imply that as a source of financing, bank lines of credit improve the corporate governance in poorly governed firms due to the monitoring by banks. This results in a significantly positive relation between bank lines of credit as a source of 5 Since our data of insider ownership starts from 1995 when the proxy statements are available online, the sample size is reduced to 444 M&As in this table. 13

14 financing and stock market performance as well as the operating performance. This effect is insignificant for well-governed firms, because these firms already have good governance and there is less room for improvements in corporate governance for these firms whey they use bank lines of credit as a source of financing. This is consistent with the agency hypothesis. Table 9 reports the results on acquisition premium when we divide the sample into subgroups based on whether there is a block holder of institutional ownership. 6 Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.08) when there is not a block holder, and Column 2 shows that the coefficient is (p-value = 0.54) when there is a block holder. We find a similar pattern in Column 3 to Column 6 when we use the acquisition premium with different time intervals. We interpret the results in Table 9 in a similar way. The results in Table 9 imply that as a source of financing, bank lines of credit improve the corporate governance in poorly governed firms due to the monitoring by banks. This results in a significantly negative relation between bank lines of credit as a source of financing and the acquisition premium. This effect is insignificant for well-governed firms, because these firms already have good governance and they tend not to overpay for the M&As no matter when bank lines of credit or corporate cash holdings are used as a source of financing. This is consistent with the agency hypothesis Heckman two-stage estimation Since firms self-select to undertake M&As, we use Heckman two-stage estimation to control for the self-selection. In the first stage, we use the multinomial logistic model reported in Table 5, and calculate the Inverse Mills Ratio based on the estimates in the models. In the second stage, we include the Inverse Mills Ratio in the regressions as an additional control variable. 6 The number of observations is 81 in Column 1 and 88 in Column 2. Similar pattern exists for other columns. Since our data of insider ownership starts from 1995 when the proxy statements are available online, we do not conduct the sub-group analysis on acquisition premium based on the deviation from optimal insider ownership because of even a fewer number of observations available. 14

15 Table 10 reports the second stage of the Heckman two-stage estimation. Panel A shows the results about the announcement return. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.01). Column 2 shows that the coefficient of Mixed Sources Dummy is (p-value = 0.23). Panel B shows the results about the Net Change in ROA. Column 1 shows that the coefficient of Bank Lines of Credit Dummy is (p-value = 0.02). Column 2 shows that the coefficient of Mixed Sources Dummy is (p-value = 0.76). The results are consistent with the findings in Table 3 and Table 4 in that the M&As entirely financed by bank lines of credit have both the best stock market performance and the best operating performance. Therefore, we find similar results after controlling for the self-selection. 5. Conclusion We examine how the performance of M&As is affected by bank lines of credit and corporate cash holdings as two sources of financing. We develop two hypotheses based on agency problem and asymmetric information. We find that both the announcement return and the change in operating performance are higher for the M&As entirely financed by bank lines of credit. We examine an acquirer s choice of the source of financing, and find that an acquirer is more likely to use bank lines of credit as the source of financing when institutional ownership is higher. We also find that the M&As entirely financed by bank lines of credit are associated with a lower level of acquisition premium. We conduct sub-group analysis to further examine the impact of corporate governance, and find consistent results. The results are consistent with the interpretation that the performance of M&As is higher when bank lines of credit are used as a source of financing. We conclude that this is consistent with the agency hypothesis. 15

16 References Bates, T., Kahle, K., Stulz, R., Why do US firms hold so much more cash than they used to? Journal of Finance 64, Bharadwaj, A., Shivdasani, A., Valuation effects of bank financing in acquisitions. Journal of Financial Economics 67, Harford, J., Corporate cash reserves and acquisitions. Journal of Finance 54, Heckman, J., Sample selection bias as a specification error. Econometrica: Journal of the econometric society Jensen, M., Agency cost of free cash flow, corporate finance, and takeovers. Corporate Finance, and Takeovers. American Economic Review 76. Lins, K., Servaes, H., Tufano, P., What drives corporate liquidity? An international survey of cash holdings and lines of credit. Journal of Financial Economics 98, Martynova, M., Renneboog, L., What determines the financing decision in corporate takeovers: Cost of capital, agency problems, or the means of payment? Journal of Corporate Finance 15, Myers, S., Majluf, N., Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics 13, Nini, G., Smith, D. C., Sufi, A., Creditor control rights, corporate governance, and firm value. Review of Financial Studies 25, Opler, T., Pinkowitz, L., Stulz, R., Williamson, R., The determinants and implications of corporate cash holdings. Journal of financial economics 52, Sufi, A., Bank lines of credit in corporate finance: An empirical analysis. Review of Financial Studies 22, Tong, Z., Deviations from optimal CEO ownership and firm value. Journal of Banking and Finance 32, Yun, H., The choice of corporate liquidity and corporate governance. Review of Financial Studies 22,

17 Appendix A. Propensity Score Matching The table shows the results for the propensity score matching. We use a logistic regression. There are 723 observations of acquirers and observations of non-acquirers from the Compustat database. We match each acquirer firm with a non-acquirer firm by propensity score matching. We define non-acquirers as the firms that do not have any M&As in the same fiscal year as the acquirers. Matched firms are selected based on nearest propensity score and the same industry defined by the 2-digit SIC code. The dependent variable is a dummy variable that equals one if a firm is an acquirer, and equals zero otherwise. Size is the logarithm of non-cash assets. M/B is non-cash assets minus value of equity plus market value of equity, divided by non-cash assets. Cash Flow is income before extraordinary items divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to noncash assets. Capital Expenditure is the ratio of capital expenditure to non-cash assets. R&D is the ratio of R&D to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. The p-value is noted in the parentheses. Acquirer=1, Non-acquirer=0 Intercept (0.01) Size t (0.01) M/B t (0.01) Cash Flow t (0.01) Leverage t (0.03) Tangibility t (0.01) Capital Expenditure t (0.01) R&D t (0.79) Dividends t (0.01) Cash Flow Volatility t (0.01) Number of Observations Pseudo R-Square

18 Appendix B. Determinants of Insider Ownership The table shows the results for the determinants of insider ownership. Following Tong (2008), we run a benchmark regression to get the determinants of insider ownership. We define Deviation from Optimal Insider Ownership as the absolute value of the residual. A higher (lower) level of Deviation from Optimal Insider Ownership indicates a lower (higher) level of corporate governance. The dependent variable is Insider Ownership, which is the ownership of all executive officers and directors. Size is the logarithm of non-cash assets. Size is the natural logarithm of the book value of assets. Cash Flow is the ratio of income before extraordinary items to assets. Sales Growth is the growth rate of sales over the previous year. Plant, Property and Equipment is the ratio of PPE to assets. R&D and Advertising is the ratio of the sum of research and development expenses and advertising expenses divided by total expenses. Earnings Volatility is the standard deviation of the ratio of income before extraordinary items to assets in the prior three years. Sales Volatility is the standard deviation of the natural logarithm of sales in the prior three years. Year Dummy Variables are the dummy variables for the years in the sample and not reported in the table. Industry Dummy Variables are the dummy variables for the industries defined by two-digit SIC codes and not reported in the table. The p-value is noted in the parentheses. Insider Ownership Intercept (0.01) Size (0.01) Size Squared (0.01) Cash Flow (0.66) Cash Flow Squared (0.83) Sales Growth (0.18) Plant, Property and Equipment (0.28) R&D and Advertising (0.15) Earnings Volatility (0.30) Sales Volatility (0.43) Year Dummy Variables Yes Industry Dummy Variables Yes Number of Observations 444 Adjusted R-square

19 Table 1: Summary Statistics The table reports summary statistics. We use a sample of 723 U.S. M&As from 1985 to CAR (-3, +3) is the cumulative abnormal return over days (-3, +3) around the announcement date (see text for details). Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Total Lines of Credit is the ratio of bank lines of credit to assets. Unused Lines of Credit is the ratio of unused lines of credit to assets. Cash is the ratio of cash and marketable securities to non-cash assets. ROA is the ratio of EBIT to non-cash assets. ROA is the change in ROA from year t-1 to t+1. Net ROA is the difference between an acquirer s change in ROA and its matched comparable firm s change in ROA from year t-1 to t+1. The comparable firms are matched by propensity score matching based on size, cash flow, market-to-book ratio, leverage, tangibility, capital expenditure, R&D, dividends and cash flow volatility (see text for details). Premium 1 is ratio of the offer price to the target share price one day prior to the acquisition announcement. Premium 2 is ratio of the offer price to the target share price one week prior to the acquisition announcement. Premium 3 is ratio of the offer price to the target share price four weeks prior to the acquisition announcement. Institutional Ownership is the ratio of shares owned by institutional investors to the total shares outstanding at the end of a quarter prior to the announcement. Block is a dummy variable that equals one if there exists a block institutional ownership which exceeds 5% of the total shares outstanding, and equals zero otherwise. Insider Ownership is the ownership of all executive officers and directors. Size is the logarithm of non-cash assets. Cash Flow is income before extraordinary items divided by non-cash assets. M/B is market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditure to non-cash assets. R&D is the ratio of R&D to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. Variable Mean 25 th Percentile Median 75 th Percentile Std Dev CAR (-3,+3) Relative Value Total Lines of Credit Unused Lines of Credit Cash ROA ROA Net ROA Premium Premium Premium Institutional Ownership Block Insider Ownership Size Cash Flow M/B Leverage Tangibility Capital Expenditure R&D Dividends Cash Flow Volatility

20 Table 2: Univariate Analysis on Announcement Return The table reports the univariate analysis on announcement return. CAR (-3, +3) is the cumulative abnormal return over days (-3, +3) around the announcement date (see text for details). Corporate Cash Holdings is the group of M&As entirely financed by corporate cash holdings. Bank Lines of Credit is the group of M&As entirely financed by bank lines of credit. Mixed Sources is the group of M&As financed by a mix of bank lines of credit and corporate cash holdings. We report the mean test and the median test in the table. Bank Lines of Credit Corporate Cash Holdings Difference Mean Median Mean Median Mean p-value Median p-value CAR (-3,+3) Mixed Sources Corporate Cash Holdings Difference Mean Median Mean Median Mean p-value Median p-value CAR (-3,+3) Bank Lines of Credit Mixed Sources Difference Mean Median Mean Median Mean p-value Median p-value CAR (-3,+3)

21 Table 3: Sources of Financing and Announcement Return The table shows the relationship between sources of financing and announcement return. The dependent variable is CAR (-3, +3), which is the cumulative abnormal return over days (-3, +3) around the announcement date (see text for details). Bank Lines of Credit Dummy equals one if an M&A is entirely financed by bank lines of credit, and equals zero otherwise. Mixed Sources Dummy equals one if an M&A is financed by a mix of bank lines of credit and corporate cash holdings. Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Size is the logarithm of non-cash assets. Cash Flow is income before extraordinary items divided by non-cash assets. M/B is market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditure to noncash assets. R&D is the ratio of R&D to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. Year Dummy Variables are the dummy variables for the years in the sample and not reported in the table. Industry Dummy Variables are the dummy variables for the industries defined by two-digit SIC codes and not reported in the table. The p-value is noted in the parentheses. CAR (-3,+3) Intercept (0.01) Bank Lines of Credit Dummy (0.02) Mixed Sources Dummy (0.69) Relative Value (0.07) Size t (0.04) Cash Flow t (0.17) M/B t (0.20) Leverage t (0.93) Tangibility t (0.67) Capital Expenditure t (0.49) R&D t (0.29) Dividends t (0.08) Cash Flow Volatility t (0.33) Year Dummy Variables Yes Industry Dummy Variables Yes Number of Observations 723 Adjusted R-square

22 Table 4: Sources of Financing and Change in Operating Performance The table shows the relationship between sources of financing and the change in operating performance. ROA is the ratio of EBIT to non-cash assets. ROA is the change in ROA from year t-1 to t+1. Net ROA is the difference between an acquirer s change in ROA and its matched comparable firm s change in ROA from year t-1 to t+1. The comparable firms are matched by propensity score matching based on size, cash flow, market-to-book ratio, leverage, tangibility, capital expenditure, R&D, dividends and cash flow volatility (see text for details). Bank Lines of Credit Dummy equals one if an M&A is entirely financed by bank lines of credit, and equals zero otherwise. Mixed Sources Dummy equals one if an M&A is financed by a mix of bank lines of credit and corporate cash holdings. Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Size is the logarithm of non-cash assets. M/B is market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditure to non-cash assets. R&D is the ratio of R&D to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. Year Dummy Variables are the dummy variables for the years in the sample and not reported in the table. Industry Dummy Variables are the dummy variables for the industries defined by two-digit SIC codes and not reported in the table. The p-value is noted in the parentheses. ROA Net ROA Intercept (0.06) (0.44) Bank Lines of Credit Dummy (0.08) (0.05) Mixed Sources Dummy (0.05) (0.40) Relative Value (0.03) (0.06) ROA t (0.01) (0.01) Size t (0.01) (0.40) M/B t (0.03) (0.68) Leverage t (0.01) (0.55) Tangibility t (0.11) (0.59) Capital Expenditure t (0.34) (0.59) R&D t (0.99) (0.59) Dividends t (0.20) (0.94) Cash Flow Volatility t (0.60) (0.03) Year Dummy Variables Yes Yes Industry Dummy Variables Yes Yes Number of Observations Adjusted R-Square

23 Table 5: Multinomial Logistic Regression The table reports the multinomial logistic regression. The dependent variable is categorical. It equals zero if an M&A is entirely financed by corporate cash holdings, equals one if an M&A is financed by a mix of bank lines of credit and corporate cash holdings, and equals two if an M&A is entirely financed by bank lines of credit. Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Cash is the ratio of cash and marketable securities to non-cash assets. Unused Lines of Credit is the ratio of unused lines of credit to non-cash assets. Institutional Ownership is the ratio of shares owned by institutional investors to the total shares outstanding at the end of a quarter prior to the announcement. Deviation from Optimal Insider Ownership is the absolute value of the residuals based on a benchmark regression of optimal insider ownership as reported in Appendix B. Size is the logarithm of noncash assets. Cash Flow is income before extraordinary items divided by non-cash assets. M/B is market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditure to non-cash assets. R&D is the ratio of R&D to non-cash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. Year Dummy Variables are the dummy variables for the years in the sample and not reported in the table. Industry Dummy Variables are the dummy variables for the industries defined by two-digit SIC codes and not reported in the table. The p-value is noted in the parentheses. Cash=0, Mixed=1, Line=2 Line vs. Cash Mixed vs. Cash Line vs. Cash Mixed vs. Cash Intercept (0.01) (0.46) (0.01) (0.92) Relative Value (0.01) (0.01) (0.01) (0.01) Cash t (0.01) (0.01) (0.01) (0.01) Unused Lines of Credit t (0.01) (0.07) (0.01) (0.06) Institutional Ownership t (0.06) (0.01) (0.07) (0.01) Deviation from Optimal Insider Ownership t (0.65) (0.22) Size t (0.01) (0.61) (0.01) (0.55) Cash Flow t (0.64) (0.65) (0.22) (0.55) M/B t (0.03) (0.14) (0.05) (0.20) Leverage t (0.37) (0.51) (0.69) (0.76) Tangibility t (0.12) (0.56) (0.39) (0.65) Capital Expenditure t (0.23) (0.93) (0.46) (0.47) R&D t (0.82) (0.41) (0.16) (0.29) Dividends t (0.53) (0.44) (0.64) (0.38) Cash Flow Volatility t (0.40) (0.86) (0.20) (0.77) Year Dummy Variables Yes Yes Yes Yes Industry Dummy Variables Yes Yes Yes Yes Number of Observations Pseudo R-Square

24 Table 6: Acquisition Premium The table reports the impact of source of financing on acquisition premium. Premium 1 is the ratio of the offer price to the target share price one day prior to the acquisition announcement. Premium 2 is the ratio of the offer price to the target share price one week prior to the acquisition announcement. Premium 3 is the ratio of the offer price to the target share price four weeks prior to the acquisition announcement. Bank Lines of Credit Dummy equals one if an M&A is entirely financed by bank lines of credit, and equals zero otherwise. Mixed Sources Dummy equals one if an M&A is financed by a mix of bank lines of credit and corporate cash holdings. Relative Value is the ratio of deal value to the sum of the acquirer s market value of equity and deal value. Size is the logarithm of non-cash assets. Cash Flow is income before extraordinary items divided by non-cash assets. M/B is market value of equity plus non-cash assets minus book value of equity, divided by non-cash assets. Leverage is the ratio of long-term debt to non-cash assets. Tangibility is the ratio of plant, property and equipment to non-cash assets. Capital Expenditure is the ratio of capital expenditure to non-cash assets. R&D is the ratio of R&D to noncash assets. Dividends is the ratio of dividends to non-cash assets. Cash Flow Volatility is the standard deviation of cash flow to non-cash assets in the prior 5 years. Year Dummy Variables are the dummy variables for the years in the sample and not reported in the table. Industry Dummy Variables are the dummy variables for the industries defined by two-digit SIC codes and not reported in the table. The p-value is noted in the parentheses. Premium1 Premium2 Premium3 Intercept (0.01) (0.01) (0.01) Bank Lines of Credit Dummy (0.08) (0.07) (0.07) Mixed Sources Dummy (0.26) (0.40) (0.49) Relative Value (0.01) (0.01) (0.01) Size t (0.01) (0.01) (0.01) Cash Flow t (0.09) (0.08) (0.11) M/B t (0.01) (0.01) (0.01) Leverage t (0.02) (0.02) (0.02) Tangibility t (0.04) (0.06) (0.05) Capital Expenditure t (0.68) (0.78) (0.69) R&D t (0.04) (0.04) (0.03) Dividends t (0.02) (0.02) (0.01) Cash Flow Volatility t (0.88) (0.91) (0.91) Year Dummy Variables Yes Yes Yes Industry Dummy Variables Yes Yes Yes Number of Observations Adjusted R-square

Deviations from Optimal Corporate Cash Holdings and the Valuation from a Shareholder s Perspective

Deviations from Optimal Corporate Cash Holdings and the Valuation from a Shareholder s Perspective Deviations from Optimal Corporate Cash Holdings and the Valuation from a Shareholder s Perspective Zhenxu Tong * University of Exeter Abstract The tradeoff theory of corporate cash holdings predicts that

More information

Firm Diversification and the Value of Corporate Cash Holdings

Firm Diversification and the Value of Corporate Cash Holdings Firm Diversification and the Value of Corporate Cash Holdings Zhenxu Tong University of Exeter* Paper Number: 08/03 First Draft: June 2007 This Draft: February 2008 Abstract This paper studies how firm

More information

Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT

Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT This study argues that the source of cash accumulation can distinguish

More information

The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings

The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings Abstract This paper empirically investigates the value shareholders place on excess cash

More information

ESSAYS IN CORPORATE FINANCE. Cong Wang. Dissertation. Submitted to the Faculty of the. Graduate School of Vanderbilt University

ESSAYS IN CORPORATE FINANCE. Cong Wang. Dissertation. Submitted to the Faculty of the. Graduate School of Vanderbilt University ESSAYS IN CORPORATE FINANCE By Cong Wang Dissertation Submitted to the Faculty of the Graduate School of Vanderbilt University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY

More information

How Markets React to Different Types of Mergers

How Markets React to Different Types of Mergers How Markets React to Different Types of Mergers By Pranit Chowhan Bachelor of Business Administration, University of Mumbai, 2014 And Vishal Bane Bachelor of Commerce, University of Mumbai, 2006 PROJECT

More information

Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion. Harry Feng a Ramesh P. Rao b

Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion. Harry Feng a Ramesh P. Rao b Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion Harry Feng a Ramesh P. Rao b a Department of Finance, Spears School of Business, Oklahoma State University, Stillwater, OK

More information

CORPORATE CASH HOLDING AND FIRM VALUE

CORPORATE CASH HOLDING AND FIRM VALUE CORPORATE CASH HOLDING AND FIRM VALUE Cristina Martínez-Sola Dep. Business Administration, Accounting and Sociology University of Jaén Jaén (SPAIN) E-mail: mmsola@ujaen.es Pedro J. García-Teruel Dep. Management

More information

Corporate Liquidity. Amy Dittmar Indiana University. Jan Mahrt-Smith London Business School. Henri Servaes London Business School and CEPR

Corporate Liquidity. Amy Dittmar Indiana University. Jan Mahrt-Smith London Business School. Henri Servaes London Business School and CEPR Corporate Liquidity Amy Dittmar Indiana University Jan Mahrt-Smith London Business School Henri Servaes London Business School and CEPR This Draft: May 2002 We are grateful to João Cocco, David Goldreich,

More information

Agency Costs of Free Cash Flow and Bidders Long-run Takeover Performance

Agency Costs of Free Cash Flow and Bidders Long-run Takeover Performance Universal Journal of Accounting and Finance 1(3): 95-102, 2013 DOI: 10.13189/ujaf.2013.010302 http://www.hrpub.org Agency Costs of Free Cash Flow and Bidders Long-run Takeover Performance Lu Lin 1, Dan

More information

Managerial Incentives and Corporate Cash Holdings

Managerial Incentives and Corporate Cash Holdings Managerial Incentives and Corporate Cash Holdings Tracy Xu University of Denver Bo Han University of Washington We examine the impact of managerial incentive on firms cash holdings policy. We find that

More information

Acquiring Intangible Assets

Acquiring Intangible Assets Acquiring Intangible Assets Intangible assets are important for corporations and their owners. The book value of intangible assets as a percentage of total assets for all COMPUSTAT firms grew from 6% in

More information

Determinant Factors of Cash Holdings: Evidence from Portuguese SMEs

Determinant Factors of Cash Holdings: Evidence from Portuguese SMEs International Journal of Business and Management; Vol. 8, No. 1; 2013 ISSN 1833-3850 E-ISSN 1833-8119 Published by Canadian Center of Science and Education Determinant Factors of Cash Holdings: Evidence

More information

EURASIAN JOURNAL OF ECONOMICS AND FINANCE

EURASIAN JOURNAL OF ECONOMICS AND FINANCE Eurasian Journal of Economics and Finance, 3(4), 2015, 22-38 DOI: 10.15604/ejef.2015.03.04.003 EURASIAN JOURNAL OF ECONOMICS AND FINANCE http://www.eurasianpublications.com DOES CASH CONTRIBUTE TO VALUE?

More information

Do Persistent Large Cash Reserves Hinder Performance?

Do Persistent Large Cash Reserves Hinder Performance? JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS VOL. 38, NO. 2, JUNE 2003 COPYRIGHT 2003, SCHOOL OF BUSINESS ADMINISTRATION, UNIVERSITY OF WASHINGTON, SEATTLE, WA 98195 Do Persistent Large Cash Reserves

More information

Prior target valuations and acquirer returns: risk or perception? *

Prior target valuations and acquirer returns: risk or perception? * Prior target valuations and acquirer returns: risk or perception? * Thomas Moeller Neeley School of Business Texas Christian University Abstract In a large sample of public-public acquisitions, target

More information

The Free Cash Flow Effects of Capital Expenditure Announcements. Catherine Shenoy and Nikos Vafeas* Abstract

The Free Cash Flow Effects of Capital Expenditure Announcements. Catherine Shenoy and Nikos Vafeas* Abstract The Free Cash Flow Effects of Capital Expenditure Announcements Catherine Shenoy and Nikos Vafeas* Abstract In this paper we study the market reaction to capital expenditure announcements in the backdrop

More information

Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation

Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation University of Massachusetts Boston From the SelectedWorks of Atreya Chakraborty January 1, 2010 Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation

More information

The Characteristics of Bidding Firms and the Likelihood of Cross-border Acquisitions

The Characteristics of Bidding Firms and the Likelihood of Cross-border Acquisitions The Characteristics of Bidding Firms and the Likelihood of Cross-border Acquisitions Han Donker, Ph.D., University of orthern British Columbia, Canada Saif Zahir, Ph.D., University of orthern British Columbia,

More information

Online Appendix to. The Value of Crowdsourced Earnings Forecasts

Online Appendix to. The Value of Crowdsourced Earnings Forecasts Online Appendix to The Value of Crowdsourced Earnings Forecasts This online appendix tabulates and discusses the results of robustness checks and supplementary analyses mentioned in the paper. A1. Estimating

More information

The Effects of Capital Infusions after IPO on Diversification and Cash Holdings

The Effects of Capital Infusions after IPO on Diversification and Cash Holdings The Effects of Capital Infusions after IPO on Diversification and Cash Holdings Soohyung Kim University of Wisconsin La Crosse Hoontaek Seo Niagara University Daniel L. Tompkins Niagara University This

More information

AN ANALYSIS OF THE DEGREE OF DIVERSIFICATION AND FIRM PERFORMANCE Zheng-Feng Guo, Vanderbilt University Lingyan Cao, University of Maryland

AN ANALYSIS OF THE DEGREE OF DIVERSIFICATION AND FIRM PERFORMANCE Zheng-Feng Guo, Vanderbilt University Lingyan Cao, University of Maryland The International Journal of Business and Finance Research Volume 6 Number 2 2012 AN ANALYSIS OF THE DEGREE OF DIVERSIFICATION AND FIRM PERFORMANCE Zheng-Feng Guo, Vanderbilt University Lingyan Cao, University

More information

M&A Activity in Europe

M&A Activity in Europe M&A Activity in Europe Cash Reserves, Acquisitions and Shareholder Wealth in Europe Master Thesis in Business Administration at the Department of Banking and Finance Faculty Advisor: PROF. DR. PER ÖSTBERG

More information

CAPITAL STRUCTURE AND THE 2003 TAX CUTS Richard H. Fosberg

CAPITAL STRUCTURE AND THE 2003 TAX CUTS Richard H. Fosberg CAPITAL STRUCTURE AND THE 2003 TAX CUTS Richard H. Fosberg William Paterson University, Deptartment of Economics, USA. KEYWORDS Capital structure, tax rates, cost of capital. ABSTRACT The main purpose

More information

Author's personal copy

Author's personal copy Journal of Banking & Finance 34 (2010) 813 824 Contents lists available at ScienceDirect Journal of Banking & Finance journal homepage: www.elsevier.com/locate/jbf Antitakeover provisions in corporate

More information

Do Investors Value Dividend Smoothing Stocks Differently? Internet Appendix

Do Investors Value Dividend Smoothing Stocks Differently? Internet Appendix Do Investors Value Dividend Smoothing Stocks Differently? Internet Appendix Yelena Larkin, Mark T. Leary, and Roni Michaely April 2016 Table I.A-I In table I.A-I we perform a simple non-parametric analysis

More information

Does Debt Help Managers? Using Cash Holdings to Explain Acquisition Returns

Does Debt Help Managers? Using Cash Holdings to Explain Acquisition Returns University of Colorado, Boulder CU Scholar Undergraduate Honors Theses Honors Program Spring 2017 Does Debt Help Managers? Using Cash Holdings to Explain Acquisition Returns Michael Evans Michael.Evans-1@Colorado.EDU

More information

Managerial Insider Trading and Opportunism

Managerial Insider Trading and Opportunism Managerial Insider Trading and Opportunism Mehmet E. Akbulut 1 Department of Finance College of Business and Economics California State University Fullerton Abstract This paper examines whether managers

More information

Do firms have leverage targets? Evidence from acquisitions

Do firms have leverage targets? Evidence from acquisitions Do firms have leverage targets? Evidence from acquisitions Jarrad Harford School of Business Administration University of Washington Seattle, WA 98195 206.543.4796 206.221.6856 (Fax) jarrad@u.washington.edu

More information

Tobin's Q and the Gains from Takeovers

Tobin's Q and the Gains from Takeovers THE JOURNAL OF FINANCE VOL. LXVI, NO. 1 MARCH 1991 Tobin's Q and the Gains from Takeovers HENRI SERVAES* ABSTRACT This paper analyzes the relation between takeover gains and the q ratios of targets and

More information

The Consistency between Analysts Earnings Forecast Errors and Recommendations

The Consistency between Analysts Earnings Forecast Errors and Recommendations The Consistency between Analysts Earnings Forecast Errors and Recommendations by Lei Wang Applied Economics Bachelor, United International College (2013) and Yao Liu Bachelor of Business Administration,

More information

Paper. Working. Unce. the. and Cash. Heungju. Park

Paper. Working. Unce. the. and Cash. Heungju. Park Working Paper No. 2016009 Unce ertainty and Cash Holdings the Value of Hyun Joong Im Heungju Park Gege Zhao Copyright 2016 by Hyun Joong Im, Heungju Park andd Gege Zhao. All rights reserved. PHBS working

More information

The Role of Credit Ratings in the. Dynamic Tradeoff Model. Viktoriya Staneva*

The Role of Credit Ratings in the. Dynamic Tradeoff Model. Viktoriya Staneva* The Role of Credit Ratings in the Dynamic Tradeoff Model Viktoriya Staneva* This study examines what costs and benefits of debt are most important to the determination of the optimal capital structure.

More information

Journal of Corporate Finance

Journal of Corporate Finance Journal of Corporate Finance 16 (2010) 588 607 Contents lists available at ScienceDirect Journal of Corporate Finance journal homepage: www.elsevier.com/locate/jcorpfin Why firms issue callable bonds:

More information

International Review of Economics and Finance

International Review of Economics and Finance International Review of Economics and Finance 24 (2012) 303 314 Contents lists available at SciVerse ScienceDirect International Review of Economics and Finance journal homepage: www.elsevier.com/locate/iref

More information

The relationship between share repurchase announcement and share price behaviour

The relationship between share repurchase announcement and share price behaviour The relationship between share repurchase announcement and share price behaviour Name: P.G.J. van Erp Submission date: 18/12/2014 Supervisor: B. Melenberg Second reader: F. Castiglionesi Master Thesis

More information

Loan Financing Cost in Mergers and Acquisitions

Loan Financing Cost in Mergers and Acquisitions Loan Financing Cost in Mergers and Acquisitions Ning Gao, Chen Hua, Arif Khurshed The Accounting and Finance Group, Alliance Manchester Business School, The University of Manchester Version: January, 2018

More information

How do serial acquirers choose the method of payment? ANTONIO J. MACIAS Texas Christian University. P. RAGHAVENDRA RAU University of Cambridge

How do serial acquirers choose the method of payment? ANTONIO J. MACIAS Texas Christian University. P. RAGHAVENDRA RAU University of Cambridge How do serial acquirers choose the method of payment? ANTONIO J. MACIAS Texas Christian University P. RAGHAVENDRA RAU University of Cambridge ARIS STOURAITIS Hong Kong Baptist University August 2012 Abstract

More information

Why Are Japanese Firms Still Increasing Cash Holdings?

Why Are Japanese Firms Still Increasing Cash Holdings? Why Are Japanese Firms Still Increasing Cash Holdings? Abstract Japanese firms resumed accumulation of cash to the highest cash holding levels among developed economies after the 2008 financial crisis.

More information

On Diversification Discount the Effect of Leverage

On Diversification Discount the Effect of Leverage On Diversification Discount the Effect of Leverage Jin-Chuan Duan * and Yun Li (First draft: April 12, 2006) (This version: May 16, 2006) Abstract This paper identifies a key cause for the documented diversification

More information

Managerial compensation and the threat of takeover

Managerial compensation and the threat of takeover Journal of Financial Economics 47 (1998) 219 239 Managerial compensation and the threat of takeover Anup Agrawal*, Charles R. Knoeber College of Management, North Carolina State University, Raleigh, NC

More information

Online Appendix for. Explaining Corporate Capital Structure: Product Markets, Leases, and Asset Similarity. Joshua D.

Online Appendix for. Explaining Corporate Capital Structure: Product Markets, Leases, and Asset Similarity. Joshua D. Online Appendix for Explaining Corporate Capital Structure: Product Markets, Leases, and Asset Similarity Section 1: Data A. Overview of Capital IQ Joshua D. Rauh Amir Sufi Capital IQ (CIQ) is a Standard

More information

Cash holdings, corporate governance, and acquirer returns

Cash holdings, corporate governance, and acquirer returns Ahn and Chung Financial Innovation (2015) 1:13 DOI 10.1186/s40854-015-0013-6 RESEARCH Open Access Cash holdings, corporate governance, and acquirer returns Seoungpil Ahn 1* and Jaiho Chung 2 * Correspondence:

More information

1. Logit and Linear Probability Models

1. Logit and Linear Probability Models INTERNET APPENDIX 1. Logit and Linear Probability Models Table 1 Leverage and the Likelihood of a Union Strike (Logit Models) This table presents estimation results of logit models of union strikes during

More information

The Effect of Corporate Governance on Quality of Information Disclosure:Evidence from Treasury Stock Announcement in Taiwan

The Effect of Corporate Governance on Quality of Information Disclosure:Evidence from Treasury Stock Announcement in Taiwan The Effect of Corporate Governance on Quality of Information Disclosure:Evidence from Treasury Stock Announcement in Taiwan Yue-Fang Wen, Associate professor of National Ilan University, Taiwan ABSTRACT

More information

The Role of Management Incentives in the Choice of Stock Repurchase Methods. Ata Torabi. A Thesis. The John Molson School of Business

The Role of Management Incentives in the Choice of Stock Repurchase Methods. Ata Torabi. A Thesis. The John Molson School of Business The Role of Management Incentives in the Choice of Stock Repurchase Methods Ata Torabi A Thesis In The John Molson School of Business Presented in Partial Fulfillment of the Requirements for the Degree

More information

Cost Structure and Payout Policy

Cost Structure and Payout Policy Cost Structure and Payout Policy Manoj Kulchania a,* a School of Business Administration, Wayne State University, Detroit, MI 48202 This draft: February 18, 2015 Keywords: Payout; Cost Structure, Repurchases;

More information

Internet Appendix for Do General Managerial Skills Spur Innovation?

Internet Appendix for Do General Managerial Skills Spur Innovation? Internet Appendix for Do General Managerial Skills Spur Innovation? Cláudia Custódio Imperial College Business School Miguel A. Ferreira Nova School of Business and Economics, ECGI Pedro Matos University

More information

Corporate Governance, Product Market Competition, and Payout Policy *

Corporate Governance, Product Market Competition, and Payout Policy * Seoul Journal of Business Volume 20, Number 1 (June 2014) Corporate Governance, Product Market Competition, and Payout Policy * HEE SUB BYUN **1) Korea Deposit Insurance Corporation Seoul, Korea JI HYE

More information

Managerial Characteristics and Corporate Cash Policy

Managerial Characteristics and Corporate Cash Policy Managerial Characteristics and Corporate Cash Policy Keng-Yu Ho Department of Finance National Taiwan University Chia-Wei Yeh Department of Finance National Taiwan University December 3, 2014 Corresponding

More information

How Does Earnings Management Affect Innovation Strategies of Firms?

How Does Earnings Management Affect Innovation Strategies of Firms? How Does Earnings Management Affect Innovation Strategies of Firms? Abstract This paper examines how earnings quality affects innovation strategies and their economic consequences. Previous literatures

More information

Firm R&D Strategies Impact of Corporate Governance

Firm R&D Strategies Impact of Corporate Governance Firm R&D Strategies Impact of Corporate Governance Manohar Singh The Pennsylvania State University- Abington Reporting a positive relationship between institutional ownership on one hand and capital expenditures

More information

Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns

Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns Abstract This research empirically investigates the relation between debt maturity structure and acquirer returns. We find that short-term

More information

Over the last 20 years, the stock market has discounted diversified firms. 1 At the same time,

Over the last 20 years, the stock market has discounted diversified firms. 1 At the same time, 1. Introduction Over the last 20 years, the stock market has discounted diversified firms. 1 At the same time, many diversified firms have become more focused by divesting assets. 2 Some firms become more

More information

Tenant Quality and REIT Liquidity Management

Tenant Quality and REIT Liquidity Management J Real Estate Finan Econ (2017) 54:272 296 DOI 10.1007/s11146-016-9575-y Tenant Quality and REIT Liquidity Management Ran Lu-Andrews 1 Published online: 3 September 2016 # Springer Science+Business Media

More information

CORPORATE GOVERNANCE AND CASH HOLDINGS: A COMPARATIVE ANALYSIS OF CHINESE AND INDIAN FIRMS

CORPORATE GOVERNANCE AND CASH HOLDINGS: A COMPARATIVE ANALYSIS OF CHINESE AND INDIAN FIRMS CORPORATE GOVERNANCE AND CASH HOLDINGS: A COMPARATIVE ANALYSIS OF CHINESE AND INDIAN FIRMS Ohannes G. Paskelian, University of Houston Downtown Stephen Bell, Park University Chu V. Nguyen, University of

More information

DETERMINANTS OF FINANCIAL STRUCTURE OF GREEK COMPANIES

DETERMINANTS OF FINANCIAL STRUCTURE OF GREEK COMPANIES Gargalis PANAGIOTIS Doctoral School of Economics and Business Administration Alexandru Ioan Cuza University of Iasi, Romania DETERMINANTS OF FINANCIAL STRUCTURE OF GREEK COMPANIES Empirical study Keywords

More information

DIVIDEND POLICY AND THE LIFE CYCLE HYPOTHESIS: EVIDENCE FROM TAIWAN

DIVIDEND POLICY AND THE LIFE CYCLE HYPOTHESIS: EVIDENCE FROM TAIWAN The International Journal of Business and Finance Research Volume 5 Number 1 2011 DIVIDEND POLICY AND THE LIFE CYCLE HYPOTHESIS: EVIDENCE FROM TAIWAN Ming-Hui Wang, Taiwan University of Science and Technology

More information

Parent Firm Characteristics and the Abnormal Return of Equity Carve-outs

Parent Firm Characteristics and the Abnormal Return of Equity Carve-outs Parent Firm Characteristics and the Abnormal Return of Equity Carve-outs Feng Huang ANR: 313834 MSc. Finance Supervisor: Fabio Braggion Second reader: Lieven Baele - 2014 - Parent firm characteristics

More information

Asian Economic and Financial Review THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS

Asian Economic and Financial Review THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS Asian Economic and Financial Review ISSN(e): 2222-6737/ISSN(p): 2305-2147 journal homepage: http://www.aessweb.com/journals/5002 THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS Jung Fang Liu 1 --- Nicholas

More information

Keywords: Equity firms, capital structure, debt free firms, debt and stocks.

Keywords: Equity firms, capital structure, debt free firms, debt and stocks. Working Paper 2009-WP-04 May 2009 Performance of Debt Free Firms Tarek Zaher Abstract: This paper compares the performance of portfolios of debt free firms to comparable portfolios of leveraged firms.

More information

C C H F C: A P A R S B 1 J B R B F 2 1. I!"#$%"!

C C H F C: A P A R S B 1 J B R B F 2 1. I!#$%! 8 : C M V M C C H F C: A P A R S B 1 J B R B F 2 A 1. I!"#$%"! Why do firms hold so many liquid assets on their balance sheets? The amount of a firm s liquidity depends on its treasury management policy.

More information

R&D and Stock Returns: Is There a Spill-Over Effect?

R&D and Stock Returns: Is There a Spill-Over Effect? R&D and Stock Returns: Is There a Spill-Over Effect? Yi Jiang Department of Finance, California State University, Fullerton SGMH 5160, Fullerton, CA 92831 (657)278-4363 yjiang@fullerton.edu Yiming Qian

More information

An Initial Investigation of Firm Size and Debt Use by Small Restaurant Firms

An Initial Investigation of Firm Size and Debt Use by Small Restaurant Firms Journal of Hospitality Financial Management The Professional Refereed Journal of the Association of Hospitality Financial Management Educators Volume 12 Issue 1 Article 5 2004 An Initial Investigation

More information

Is There a (Valuation) Cost for Inadequate Liquidity? Ajay Khorana, Ajay Patel & Ya-wen Yang

Is There a (Valuation) Cost for Inadequate Liquidity? Ajay Khorana, Ajay Patel & Ya-wen Yang Is There a (Valuation) Cost for Inadequate Liquidity? Ajay Khorana, Ajay Patel & Ya-wen Yang Current Debate Surrounding Cash Holdings of US Firms Public interest in cash holdings has increased over the

More information

The Altman Z is 50 and Still Young: Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock (Revised Title)

The Altman Z is 50 and Still Young: Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock (Revised Title) The Altman Z is 50 and Still Young: Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock (Revised Title) Abstract This study is motivated by the continuing popularity of the Altman

More information

How increased diversification affects the efficiency of internal capital market?

How increased diversification affects the efficiency of internal capital market? How increased diversification affects the efficiency of internal capital market? ABSTRACT Rong Guo Columbus State University This paper investigates the effect of increased diversification on the internal

More information

Effects of Managerial Incentives on Earnings Management

Effects of Managerial Incentives on Earnings Management DOI: 10.7763/IPEDR. 2013. V61. 6 Effects of Managerial Incentives on Earnings Management Fu-Hui Chuang 1, Yuang-Lin Chang 2, Wern-Shyuan Song 3, and Ching-Chieh Tsai 4+ 1, 2, 3, 4 Department of Accounting

More information

Cash Holdings in German Firms

Cash Holdings in German Firms Cash Holdings in German Firms S. Schuite Tilburg University Department of Finance PO Box 90153, NL 5000 LE Tilburg, The Netherlands ANR: 523236 Supervisor: Prof. dr. V. Ioannidou CentER Tilburg University

More information

Cash holdings determinants in the Portuguese economy 1

Cash holdings determinants in the Portuguese economy 1 17 Cash holdings determinants in the Portuguese economy 1 Luísa Farinha Pedro Prego 2 Abstract The analysis of liquidity management decisions by firms has recently been used as a tool to investigate the

More information

Long-Run Investment Decisions, Operating Performance and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits

Long-Run Investment Decisions, Operating Performance and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits Long-Run Investment Decisions, Operating Performance and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits Chris E. Hogan Edwin L. Cox School of Business Southern

More information

Share Issuance and Cash Holdings: Evidence of Market Timing or Precautionary Motives? a

Share Issuance and Cash Holdings: Evidence of Market Timing or Precautionary Motives? a Share Issuance and Cash Holdings: Evidence of Market Timing or Precautionary Motives? a R. David McLean b First Draft: June 23, 2007 This Draft: March 26, 2008 Abstract Over the past 35 years, the average

More information

Internet Appendix for Corporate Cash Shortfalls and Financing Decisions. Rongbing Huang and Jay R. Ritter. August 31, 2017

Internet Appendix for Corporate Cash Shortfalls and Financing Decisions. Rongbing Huang and Jay R. Ritter. August 31, 2017 Internet Appendix for Corporate Cash Shortfalls and Financing Decisions Rongbing Huang and Jay R. Ritter August 31, 2017 Our Figure 1 finds that firms that have a larger are more likely to run out of cash

More information

Territorial Tax System Reform and Corporate Financial Policies

Territorial Tax System Reform and Corporate Financial Policies Territorial Tax System Reform and Corporate Financial Policies Matteo P. Arena Department of Finance 312 Straz Hall Marquette University Milwaukee, WI 53201-1881 Tel: (414) 288-3369 E-mail: matteo.arena@mu.edu

More information

CORPORATE CASH HOLDINGS: STUDY OF CHINESE FIRMS. Siheng Chen Bachelor of Arts and Social Science, Simon Fraser University, 2012.

CORPORATE CASH HOLDINGS: STUDY OF CHINESE FIRMS. Siheng Chen Bachelor of Arts and Social Science, Simon Fraser University, 2012. CORPORATE CASH HOLDINGS: STUDY OF CHINESE FIRMS by Siheng Chen Bachelor of Arts and Social Science, Simon Fraser University, 2012 and Shuai Liu Bachelor of Arts, Dongbei University of Finance and Economics,

More information

Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance.

Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance. Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance. Guillermo Acuña, Jean P. Sepulveda, and Marcos Vergara December 2014 Working Paper 03 Ownership Concentration

More information

An Empirical Investigation of the Lease-Debt Relation in the Restaurant and Retail Industry

An Empirical Investigation of the Lease-Debt Relation in the Restaurant and Retail Industry University of Massachusetts Amherst ScholarWorks@UMass Amherst International CHRIE Conference-Refereed Track 2011 ICHRIE Conference Jul 28th, 4:45 PM - 4:45 PM An Empirical Investigation of the Lease-Debt

More information

Local Culture and Dividends

Local Culture and Dividends Local Culture and Dividends Erdem Ucar I empirically investigate whether geographical variations in local culture, as proxied by local religion, affect dividend demand and corporate dividend policy for

More information

Long Term Performance of Divesting Firms and the Effect of Managerial Ownership. Robert C. Hanson

Long Term Performance of Divesting Firms and the Effect of Managerial Ownership. Robert C. Hanson Long Term Performance of Divesting Firms and the Effect of Managerial Ownership Robert C. Hanson Department of Finance and CIS College of Business Eastern Michigan University Ypsilanti, MI 48197 Moon H.

More information

Internet Appendix to Does Policy Uncertainty Affect Mergers and Acquisitions?

Internet Appendix to Does Policy Uncertainty Affect Mergers and Acquisitions? Internet Appendix to Does Policy Uncertainty Affect Mergers and Acquisitions? Alice Bonaime Huseyin Gulen Mihai Ion March 23, 2018 Eller College of Management, University of Arizona, Tucson, AZ 85721.

More information

Corporate Ownership & Control / Volume 7, Issue 2, Winter 2009 MANAGERIAL OWNERSHIP, CAPITAL STRUCTURE AND FIRM VALUE

Corporate Ownership & Control / Volume 7, Issue 2, Winter 2009 MANAGERIAL OWNERSHIP, CAPITAL STRUCTURE AND FIRM VALUE SECTION 2 OWNERSHIP STRUCTURE РАЗДЕЛ 2 СТРУКТУРА СОБСТВЕННОСТИ MANAGERIAL OWNERSHIP, CAPITAL STRUCTURE AND FIRM VALUE Wenjuan Ruan, Gary Tian*, Shiguang Ma Abstract This paper extends prior research to

More information

Internet Appendix for Private Equity Firms Reputational Concerns and the Costs of Debt Financing. Rongbing Huang, Jay R. Ritter, and Donghang Zhang

Internet Appendix for Private Equity Firms Reputational Concerns and the Costs of Debt Financing. Rongbing Huang, Jay R. Ritter, and Donghang Zhang Internet Appendix for Private Equity Firms Reputational Concerns and the Costs of Debt Financing Rongbing Huang, Jay R. Ritter, and Donghang Zhang February 20, 2014 This internet appendix provides additional

More information

Institutional Ownership, Managerial Ownership and Dividend Policy in Bank Holding Companies

Institutional Ownership, Managerial Ownership and Dividend Policy in Bank Holding Companies Vol 2, No. 1, Spring 2010 Page 9~22 Institutional Ownership, Managerial Ownership and Dividend Policy in Bank Holding Companies Yuan Wen a, Jingyi Jia b a. Department of Finance and Quantitative Analysis,

More information

The Determinants of Corporate Hedging Policies

The Determinants of Corporate Hedging Policies International Journal of Business and Social Science Vol. 2 No. 6; April 2011 The Determinants of Corporate Hedging Policies Xuequn Wang Faculty of Business Administration, Lakehead University 955 Oliver

More information

DOES INFORMATION ASYMMETRY EXPLAIN THE DIVERSIFICATION DISCOUNT? Abstract

DOES INFORMATION ASYMMETRY EXPLAIN THE DIVERSIFICATION DISCOUNT? Abstract The Journal of Financial Research Vol. XXVII, No. 2 Pages 235 249 Summer 2004 DOES INFORMATION ASYMMETRY EXPLAIN THE DIVERSIFICATION DISCOUNT? Ronald W. Best and Charles W. Hodges State University of West

More information

Incentive Compensation vs SOX: Evidence from Corporate Acquisition Decisions

Incentive Compensation vs SOX: Evidence from Corporate Acquisition Decisions Incentive Compensation vs SOX: Evidence from Corporate Acquisition Decisions DAVID HILLIER, PATRICK McCOLGAN, and ATHANASIOS TSEKERIS * ABSTRACT We empirically examine the impact of incentive compensation

More information

CORPORATE CASH HOLDINGS AND FIRM VALUE EVIDENCE FROM CHINESE INDUSTRIAL MARKET

CORPORATE CASH HOLDINGS AND FIRM VALUE EVIDENCE FROM CHINESE INDUSTRIAL MARKET CORPORATE CASH HOLDINGS AND FIRM VALUE EVIDENCE FROM CHINESE INDUSTRIAL MARKET by Lixian Cao Bachelor of Business Administration in International Accounting Nankai University, 2013 and Chen Chen Bachelor

More information

The Design of Financial Policies in Corporate Spin-offs

The Design of Financial Policies in Corporate Spin-offs The Design of Financial Policies in Corporate Spin-offs Vikas Mehrotra University of Alberta Wayne Mikkelson University of Oregon Megan Partch University of Oregon We examine differences in financial leverage

More information

Internet Appendix for: Does Going Public Affect Innovation?

Internet Appendix for: Does Going Public Affect Innovation? Internet Appendix for: Does Going Public Affect Innovation? July 3, 2014 I Variable Definitions Innovation Measures 1. Citations - Number of citations a patent receives in its grant year and the following

More information

Financial Conservatism: Evidence on Capital Structure from Low Leverage Firms. Bernadette A. Minton and Karen H. Wruck* Draft: July 9, 2001.

Financial Conservatism: Evidence on Capital Structure from Low Leverage Firms. Bernadette A. Minton and Karen H. Wruck* Draft: July 9, 2001. Financial Conservatism: Evidence on Capital Structure from Low Leverage Firms Bernadette A. Minton and Karen H. Wruck* Draft: July 9, 2001 Abstract A persistent and puzzling empirical regularity is the

More information

MERGERS AND ACQUISITIONS: THE ROLE OF GENDER IN EUROPE AND THE UNITED KINGDOM

MERGERS AND ACQUISITIONS: THE ROLE OF GENDER IN EUROPE AND THE UNITED KINGDOM ) MERGERS AND ACQUISITIONS: THE ROLE OF GENDER IN EUROPE AND THE UNITED KINGDOM Ersin Güner 559370 Master Finance Supervisor: dr. P.C. (Peter) de Goeij December 2013 Abstract Evidence from the US shows

More information

Corporate cash shortfalls and financing decisions

Corporate cash shortfalls and financing decisions Corporate cash shortfalls and financing decisions Rongbing Huang and Jay R. Ritter November 23, 2018 Abstract Given their actual revenue and spending, most net equity rs and an overwhelming majority of

More information

THE CAPITAL STRUCTURE S DETERMINANT IN FIRM LOCATED IN INDONESIA

THE CAPITAL STRUCTURE S DETERMINANT IN FIRM LOCATED IN INDONESIA THE CAPITAL STRUCTURE S DETERMINANT IN FIRM LOCATED IN INDONESIA Linna Ismawati Sulaeman Rahman Nidar Nury Effendi Aldrin Herwany ABSTRACT This research aims to identify the capital structure s determinant

More information

Why Do Companies Choose to Go IPOs? New Results Using Data from Taiwan;

Why Do Companies Choose to Go IPOs? New Results Using Data from Taiwan; University of New Orleans ScholarWorks@UNO Department of Economics and Finance Working Papers, 1991-2006 Department of Economics and Finance 1-1-2006 Why Do Companies Choose to Go IPOs? New Results Using

More information

Corporate Liquidity, Acquisitions, and Macroeconomic Conditions

Corporate Liquidity, Acquisitions, and Macroeconomic Conditions Corporate Liquidity, Acquisitions, and Macroeconomic Conditions Isil Erel Ohio State University Yeejin Jang Purdue University Bernadette A. Minton Ohio State University Michael S. Weisbach Ohio State University,

More information

Audit Quality of Second-Tier Auditors: Are All Created Equally? R. Mithu Dey and Lucy S. Lim. Web Appendix

Audit Quality of Second-Tier Auditors: Are All Created Equally? R. Mithu Dey and Lucy S. Lim. Web Appendix Audit Quality of Second-Tier Auditors: Are All Created Equally? R. Mithu Dey and Lucy S. Lim The BRC Academy Journal of Business 4, no. 1 (2014): 1-26. http://dx.doi.org/10.15239/j.brcacadjb.2014.04.01.ja01

More information

Audit Opinion Prediction Before and After the Dodd-Frank Act

Audit Opinion Prediction Before and After the Dodd-Frank Act Audit Prediction Before and After the Dodd-Frank Act Xiaoyan Cheng, Wikil Kwak, Kevin Kwak University of Nebraska at Omaha 6708 Pine Street, Mammel Hall 228AA Omaha, NE 68182-0048 Abstract Our paper examines

More information

Debt vs. equity: analysis using shelf offerings under universal shelf registrations

Debt vs. equity: analysis using shelf offerings under universal shelf registrations Debt vs. equity: analysis using shelf offerings under universal shelf registrations Sigitas Karpavičius Jo-Ann Suchard January 15, 2009 Abstract The goal of this paper is to examine the factors that determine

More information

Optimal Debt-to-Equity Ratios and Stock Returns

Optimal Debt-to-Equity Ratios and Stock Returns Utah State University DigitalCommons@USU All Graduate Plan B and other Reports Graduate Studies 5-2014 Optimal Debt-to-Equity Ratios and Stock Returns Courtney D. Winn Utah State University Follow this

More information

Determinants of Target Capital Structure: The Case of Dual Debt and Equity Issues

Determinants of Target Capital Structure: The Case of Dual Debt and Equity Issues Determinants of Target Capital Structure: The Case of Dual Debt and Equity Issues Armen Hovakimian Baruch College Gayane Hovakimian Fordham University Hassan Tehranian Boston College We thank Jim Booth,

More information