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18
Attracting Investor Attention through Advertising
, 2011
"... This paper provides evidence that managers adjust firm advertising, in part, to attract investor attention and influence short term stock returns. First, the paper shows that increased advertising spending is associated with a contemporaneous rise in retail buying and in abnormal stock returns, and ..."
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Cited by 11 (1 self)
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This paper provides evidence that managers adjust firm advertising, in part, to attract investor attention and influence short term stock returns. First, the paper shows that increased advertising spending is associated with a contemporaneous rise in retail buying and in abnormal stock returns, and is followed by lower future returns. Next, the paper documents a significant increase in advertising spending prior to insider sales, and a significant decrease in the following year. A similar pattern arises around equity issues and stock-financed acquisitions, but is absent around debt issues and cash-financed acquisitions. Additional analyses suggest that the humpshaped pattern in advertising spending around equity sales is most consistent with managers’ opportunistically adjusting firm advertising to exploit the return effect to the benefit of their own and that of their existing shareholders.
Learning by doing: The value of experience and the origins of skill for mutual fund managers, unpublished paper
, 2013
"... Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained expe-rience on the job. The key to our identification strategy is that we look “inside ” funds and exploit heterogeneity in experienc ..."
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Cited by 4 (1 self)
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Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained expe-rience on the job. The key to our identification strategy is that we look “inside ” funds and exploit heterogeneity in experience for the same manager at a given point in time across industries. As fund managers become more experienced, they pick better stocks, and their trades become better predictors for abnormal stock returns around subsequent earnings an-nouncements. Our approach identifies experience as a first-order driver of observed mutual fund manager skill.
The costs and benefits of clawback provisions in CEO compensation, Review of Corporate Finance Studies, forthcoming
, 2015
"... We analyze the costs and benefits of clawback provisions that enable firms to recover incentive compensation from top management if financials are restated. In a simple contracting model, we find that a clawback provision effectively lengthens the hori-zon of incentives and curbs misreporting. Howev ..."
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We analyze the costs and benefits of clawback provisions that enable firms to recover incentive compensation from top management if financials are restated. In a simple contracting model, we find that a clawback provision effectively lengthens the hori-zon of incentives and curbs misreporting. However, such a provision can add noise to the underlying performance measure, reducing managerial effort and firm value. Our empirical tests support the model’s predictions regarding which types of firms are likely to voluntarily use clawback provisions. We also document that claw-back provisions are associated with higher reporting quality, greater CEO pay-for-performance sensitivity, and higher CEO compensation. (JEL G30, G34, G38) Following the financial crisis of 2007–2008, considerable attention has been focused on the structure of compensation contracts for top man-agement. Of particular concern is whether short-term performance pay before and during the crisis fostered incentives to engage in fraudulent financial misreporting. In view of this concern, academics, policymakers, and shareholder activists have called for a tighter link between CEO
Agency Costs and Strategic Speculation in the U.S. Stock Market
, 2015
"... This work cannot be used without the author's permission. This paper can be downloaded without charge from the ..."
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This work cannot be used without the author's permission. This paper can be downloaded without charge from the
Supervisor:
, 2013
"... quotation from it or information derived from it is to be published without full acknowledgement of the source. The thesis is to be used for private study or non-commercial research purposes only. Published by the University of Cape Town (UCT) in terms of the non-exclusive license granted to UCT by ..."
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quotation from it or information derived from it is to be published without full acknowledgement of the source. The thesis is to be used for private study or non-commercial research purposes only. Published by the University of Cape Town (UCT) in terms of the non-exclusive license granted to UCT by the author. Un ive rsi ty f C ap e T ow n Un ive rsi ty
ESSAYS ON BENCHMARKING CREDIT PERFORMANCE
"... The first essay examines idiosyncratic and systematic distress predictors for small and medium sized enterprises (SMEs) using a dataset from eight European countries over the period 2000-2009. In the European Union, small and medium sized enterprises (SMEs) represent 99 % of all businesses and contr ..."
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The first essay examines idiosyncratic and systematic distress predictors for small and medium sized enterprises (SMEs) using a dataset from eight European countries over the period 2000-2009. In the European Union, small and medium sized enterprises (SMEs) represent 99 % of all businesses and contribute to more than half of total value-added. In this essay, we find that SMEs across Europe are vulnerable to common idiosyncratic factors but the relevant systematic factors vary across regions. This indicates the superiority of regional distress models. We also find that systematic factors move average distress rates in the economy and that small SMEs are more vulnerable to these factors compared to large SMEs. By including many very small companies in the sample, this essay offers unique insights into the European small business sector. By exploring distress in a multi-country setting, our models uncover regional vulnerabilities and allow for regional comparisons. Finally, by incorporating systematic dependencies, they capture distress co-movements and clustering. The second essay provides an explanation of the default anomaly documented in the empirical asset pricing literature. While empirical literature has documented a negative relation between default risk and stock returns, theory suggests that default risk should be positively
Learning By Doing: The Value Of Experience And The Origins Of Skill For Mutual Fund Managers
, 2014
"... Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained experience on the job. The key to our identification strategy is that we look “inside " funds and exploit heterogeneity in exper ..."
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Learning by doing matters for professional investors. We develop a new methodology to show that mutual fund managers outperform in industries where they have obtained experience on the job. The key to our identification strategy is that we look “inside " funds and exploit heterogeneity in experience for the same manager at a given point in time across industries. As fund managers become more experienced, they pick better stocks, and their trades become better predictors for abnormal stock returns around subsequent earnings announcements. Our approach identifies experience as a first-order driver of observed mutual fund manager skill.
Essays in Corporate Governance
"... In the first chapter (â??Governance by Litigationâ??) I study the role of shareholder litigation rights in corporate governance. To empirically identify the effects of shareholder lawsuits, I use the staggered adoption of universal demand (UD) laws in 23 states between 1989 and 2005. These laws impo ..."
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In the first chapter (â??Governance by Litigationâ??) I study the role of shareholder litigation rights in corporate governance. To empirically identify the effects of shareholder lawsuits, I use the staggered adoption of universal demand (UD) laws in 23 states between 1989 and 2005. These laws impose a significant obstacle to lawsuits against directors and officers for breach of fiduciary duty. UD laws are associated with increased use of governance provisions (e.g., classified boards) that entrench managers or otherwise limit shareholder voice. I also document fewer institutional blockholders, changes to financial policies and CEO compensation, and impaired performance for firms subject to UD. Overall, my findings cast doubt on the notion that shareholder lawsuits primarily benefit attorneys rather than corporations or their shareholders In the second chapter (â??Passive Investors, Not Passive Ownersâ?? with Todd Gormley and Donald Keim) we examine whether and by which mechanisms passive investors influence firmsâ?? governance structures. Our empirical strategy exploits variation in passive institutional ownership that results from stocks being assigned to either the Russell 1000 or 2000 index. Our findings suggest that passive investors play a key role in influencing firmsâ?? governance choices; ownership by passive institutions is associated with more independent directors, the removal of poison pills and restrictions on shareholdersâ?? ability to call special
Do Funds Make More When They Trade More?
"... Abstract We find that active mutual funds perform better after trading more. This time-series relation between a fund's turnover and its subsequent benchmarkadjusted return is especially strong for small, high-fee funds. These results are consistent with high-fee funds having greater skill to ..."
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Abstract We find that active mutual funds perform better after trading more. This time-series relation between a fund's turnover and its subsequent benchmarkadjusted return is especially strong for small, high-fee funds. These results are consistent with high-fee funds having greater skill to identify time-varying profit opportunities and with small funds being more able to exploit those opportunities. In addition to this novel evidence of managerial skill and fund-level decreasing returns to scale, we find evidence of industry-level decreasing returns: The positive turnover-performance relation weakens when funds act more in concert. We also identify a common component of fund trading that is correlated with mispricing proxies and helps predict fund returns.
Distribution Fees and Mutual Fund Flows: Evidence from a Natural Experiment in the Indian Mutual Funds Market ∗
, 2012
"... Mutual fund companies typically charge investors distribution fees, such as 12b-1 fees in the United States, which they then use to pay commissions to brokers. We evaluate a major Indian investor protection reform that limited the ability of mutual funds to charge distribution fees to pay broker com ..."
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Mutual fund companies typically charge investors distribution fees, such as 12b-1 fees in the United States, which they then use to pay commissions to brokers. We evaluate a major Indian investor protection reform that limited the ability of mutual funds to charge distribution fees to pay broker commissions. We identify the impact of this policy change by comparing funds charging high distribution fees prior to the reform to those charging low distribution fees; we show that trends in asset growth across these groups prior to the reform were similar, and argue that a comparison of their asset growth after the reform is indicative of the policy impact. Contrary to claims by industry that banning distribution fees would dramatically reduce investment in mutual funds, we find no evidence that the post-reform asset growth was lower for funds charging higher distribution fees prior to the reform. We primarily find that asset growth in funds with previously high distribution fees was higher after the policy change. At the aggregate level, our results suggest that Indian mutual fund growth in the post-policy period was lower for reasons independent of this policy change, such as a general move away from mutual funds towards real assets such as gold and real estate following the 2008 financial
