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Essays in financial economics.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Essays in financial economics./
Author:	Baker, Malcolm Perkins.
Description:	1 online resource (141 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 62-08, Section: A.
Contained By:	Dissertations Abstracts International62-08A.
Subject:	Finance. -
Online resource:	click for full text (PQDT)
ISBN:	9780599954908

Essays in financial economics.
Baker, Malcolm Perkins.

Essays in financial economics. - 1 online resource (141 pages)

Source: Dissertations Abstracts International, Volume: 62-08, Section: A.

Thesis (Ph.D.)--Harvard University, 2000.

Includes bibliographical references

This thesis consists of three essays in financial economics. Essay 1 shows how career concerns can lead to inefficient reinvestment decisions. Managers may have an incentive to inflate interim returns by refinancing bad projects and delaying write-offs. In venture capital, the syndication of follow-on investments helps solve this problem by providing an intermediate, arms-length valuation. I present evidence that young venture firms use syndication to certify investment quality. Moreover, the gap in quality between syndicated and non-syndicated investments is especially high for young venture firms, suggesting that managerial career concerns may have a material impact on the efficiency of staged investment. Essay 2, joint with Jeffrey Wurgler, shows that the share of equity issues in total new equity and debt issues is a strong predictor of U.S. stock market returns between 1928 and 1997. In particular, firms issue relatively more equity than debt just before periods of low market returns. We do not find support for efficient market explanations of the results. Instead, the fact that the equity share sometimes predicts significantly negative market returns suggests inefficiency and that firms time the market component of their returns when issuing securities. Essay 3, joint with Serkan Savasoglu, evaluates 2,124 risk arbitrage positions that provide a fixed profit when a merger or acquisition is successfully completed. This large sample allows us to evaluate the portfolio return to risk arbitrage, which has an abnormal return of about 0.9 percent per month from 1978 through 1996. The cross-section of risk arbitrage positions helps explain this abnormal return. Consistent with limited arbitrage, we find that excess returns are increasing in target size and post-announcement trading volume. Also, the idiosyncratic risk of deal completion and the supply of arbitrage capital influence returns. When arbitrageurs' equity holdings fall, subsequent risk arbitrage returns rise. We conclude that limited arbitrage plays a role in the market pricing of merger and acquisition offers.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2024

Mode of access: World Wide Web

ISBN: 9780599954908Subjects--Topical Terms:

559073
Finance.
Subjects--Index Terms:

ArbitrageIndex Terms--Genre/Form:

554714
Electronic books.

Essays in financial economics.
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504 $a Includes bibliographical references
520 $a This thesis consists of three essays in financial economics. Essay 1 shows how career concerns can lead to inefficient reinvestment decisions. Managers may have an incentive to inflate interim returns by refinancing bad projects and delaying write-offs. In venture capital, the syndication of follow-on investments helps solve this problem by providing an intermediate, arms-length valuation. I present evidence that young venture firms use syndication to certify investment quality. Moreover, the gap in quality between syndicated and non-syndicated investments is especially high for young venture firms, suggesting that managerial career concerns may have a material impact on the efficiency of staged investment. Essay 2, joint with Jeffrey Wurgler, shows that the share of equity issues in total new equity and debt issues is a strong predictor of U.S. stock market returns between 1928 and 1997. In particular, firms issue relatively more equity than debt just before periods of low market returns. We do not find support for efficient market explanations of the results. Instead, the fact that the equity share sometimes predicts significantly negative market returns suggests inefficiency and that firms time the market component of their returns when issuing securities. Essay 3, joint with Serkan Savasoglu, evaluates 2,124 risk arbitrage positions that provide a fixed profit when a merger or acquisition is successfully completed. This large sample allows us to evaluate the portfolio return to risk arbitrage, which has an abnormal return of about 0.9 percent per month from 1978 through 1996. The cross-section of risk arbitrage positions helps explain this abnormal return. Consistent with limited arbitrage, we find that excess returns are increasing in target size and post-announcement trading volume. Also, the idiosyncratic risk of deal completion and the supply of arbitrage capital influence returns. When arbitrageurs' equity holdings fall, subsequent risk arbitrage returns rise. We conclude that limited arbitrage plays a role in the market pricing of merger and acquisition offers.
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650 4 $a Studies. $3 1437762
650 4 $a Investments. $3 557691
650 4 $a Success. $3 571577
650 4 $a Equilibrium. $3 680633
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