Purpose Using the small-business loan market, this paper aims to test whether a structural shift ... more Purpose Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital. Design/methodology/approach This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues. Findings The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of credit even after adjusting for credit ratings. Practical implications This research highlights the importance of credit report awareness/monitoring by entrepreneurs, as the small-business credit rating grows rapidly. Relationship lending is not enough to reach optimal financing costs. These papers call for more regulated credit ratings industry to reduce potential moral hazards. Originality/value This paper tests whether bank lending relationships (soft information) still matter after accounting for credit ratings (hard information). Additionally, this study measures the extent to which information sharing by data services bureaus, a proxy for informational efficiency, has increased allocation efficiency in the small-business loan market.
ABSTRACT We move beyond the all or nothing purchasing power parity (PPP) proposition that has bee... more ABSTRACT We move beyond the all or nothing purchasing power parity (PPP) proposition that has been the norm in previous literature. We test whether inflation, nominal exchange rate volatility, and trade and financial openness influence the stationarity of real exchange rates on a sample of Latin American and Caribbean countries plus Canada during the post Bretton-Woods era. Countries with high inflation and high exchange rate volatility are more likely to support PPP. Classifying the countries by traditional trade openness is not possible to find stationarity consistent with the findings of Alba and Papell (2007) that more open countries are more likely to support PPP. However, when trade openness is parameterized by “relative weight trade intensity” (RWTI), which provides a bi-dimensional approach to international trade weight, we find that higher trade openness leads to higher support of PPP. Westerlund (2007) cointegration error correction model (ECM) tests in panels indicate that financial openness supports PPP only when national debt is not considered. Financially open countries and those that open their borders to trade are more likely to have a mean reversion of exchange rates. These outcomes are relevant to emphasize the benefits of trade and financial openness in economies close to the United States.
DOAJ (DOAJ: Directory of Open Access Journals), Mar 1, 2011
ABSTRACT This article investigates how recent failures of seven publicly-traded commercial banks ... more ABSTRACT This article investigates how recent failures of seven publicly-traded commercial banks and the banking crises of 2008 affect the wealth, the systematic and nonsystematic risk, and total risk of commercial banks. We find that the total risk of medium-sized banks is slightly more affected by the turbulence in the financial sector than larger banks. The changes in wealth are positive overall and marginally significant. Taken as a whole, the results indicate that at the end of 2008, the major consequences of the bank failure events are reflected in the level of risk and in modest changes in wealth. There is some indication that investors differentiate which bank type has more exposure, which consequently increases the risk of banks with similar characteristics as the failed banks. The best hedging strategy should therefore consider the inclusion of medium-size federally chartered banks, large banks, and money centers with a state charter only. Our results imply that regulators should more closely monitor bank holding companies based on size and charter type particularly during financial turbulence.
This article attempts to provide a comprehensive overview of the Eastern Cuba Baptist Theological... more This article attempts to provide a comprehensive overview of the Eastern Cuba Baptist Theological Seminary within the larger context of theological education in Cuba. Three major purposes directed the research reported in this paper. The first purpose was historical: to document and evaluate the rise and achievements of the Eastern Cuba Theological Seminary, which has continued its mission through extraordinary
Purpose
This paper examines the effect of managerial insider trading on analyst forecast accuracy... more Purpose This paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion, and bias. Specifically, we test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, we examine this relationship around Regulation Fair Disclosure (FD) and the Galleon insider trading case.
Design/methodology/approach We employ pooled OLS regressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors. We regress our proxies for forecast precision on alternative measures of insider trading activities and a vector of control variables.
Findings Insider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion, and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts’ independent opinion and increases the precision of their forecast.
Practical implications Regulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using internet sources with direct release to the public to ensure a more timely information dissemination.
Originality/value We document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the SEC prohibited the selective disclosure of material non-public information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.
We find partial support for a permanent increase in firm value following U.S. cross-listings. Cro... more We find partial support for a permanent increase in firm value following U.S. cross-listings. Crosslisted firms with capital-raising intentions on U.S. exchanges and firms cross-listing after the Sarbanes-Oxley Act exhibit an increase in firm value. Yet, investors are worse off in the long run when owning insider-controlled cross-listings. Compared to non-insider-owned cross-listings, insider-owned firms have a greater rise in value around the cross-listing year but also a larger decline in the post-cross-listing years. In fact, insider-owned firms lose value by the fifth year, compared with their value before cross-listing. Lastly, we show that liquidity and visibility enhance the value of cross-listings.
The Quarterly Review of Economics and Finance., 2016
The well-documented information content of dividends is contingent on the firm’s corporate govern... more The well-documented information content of dividends is contingent on the firm’s corporate governance. Using cross-listing events, we find that firms reach a new equilibrium dividend policy after a shift in the level of shareholder protection and the direction of the dividend adjustment depends on the pre-cross-listing locus of control. Exchange-traded cross-listings can afford to decrease dividend payouts as they substitute dividends with better corporate governance. However, dividend distributions and the likelihood to pay dividends increase when cross-listings are controlled by insiders, supporting the signaling hypothesis. The cross-listing level
PurposeThe authors measure the cost of equity to earnings yield differential for a sample of 2,03... more PurposeThe authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if the cost of equity to earnings yield differential is related to dividend policy in the manner predicted by agency theory.Design/methodology/approachAgency theory says a firm's optimal dividend policy is partially determined by the relationship between the earnings yield and the cost of equity capital. When the cost of equity is higher (lower) than the earnings yield, firms are motivated to (not) pay dividends as this reduces the cost of capital and holding other things constant, increases corporate valuations. The authors test whether managers set dividend policies to maximize the value of the firm.FindingsThe study’s findings show that when the cost of equity is higher (lower) than earnings yield, firms are more (less) likely to be dividend payers and the payouts are higher (lower). The results...
We provide consistent evidence that financial analysts employ publicly-available insider-trading ... more We provide consistent evidence that financial analysts employ publicly-available insider-trading information in the six months prior to making their earnings forecasts to enhance the accuracy of their forecasts. Specifically, we document that firms with increased insider ownership in the six months leading to the forecast issues enjoy significantly better recommendation from analysts compared to firms with unchanged or decreased insider ownership. The results uncover a relevant source of information which complements analysts’ independent opinion and increases the value of their forecast. Through this process, capital markets become more efficient as insiders’ beliefs are disseminated to the public through an additional channel in the form of analysts’ guidance, thereby supporting prior work positing that insider trading enhances market efficiency. The influence of insider trading on forecast accuracy is more robust among non-high-tech sectors, which dissipates during the post-Galle...
This study evaluates the effect of the Capital Purchase Program during the 2008-2009 financial cr... more This study evaluates the effect of the Capital Purchase Program during the 2008-2009 financial crisis on the cost of equity of 170 publicly listed banks in the United States that received funding. We document robust evidence that the liquidity provided by the government bailout reduced the cost of equity for recipient banks, especially for those banks that repaid their bailout funds in full. The decrease in the cost of equity is particularly significant for banks with high market-to-book ratios, low concentrations of institutional ownership, and those with at least one large blockholder. Our findings have important implications for the assessment of government bailout programs and future regulation of financial institutions.
Purpose Using the small-business loan market, this paper aims to test whether a structural shift ... more Purpose Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital. Design/methodology/approach This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues. Findings The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of cred...
Purpose Using the small-business loan market, this paper aims to test whether a structural shift ... more Purpose Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital. Design/methodology/approach This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues. Findings The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of credit even after adjusting for credit ratings. Practical implications This research highlights the importance of credit report awareness/monitoring by entrepreneurs, as the small-business credit rating grows rapidly. Relationship lending is not enough to reach optimal financing costs. These papers call for more regulated credit ratings industry to reduce potential moral hazards. Originality/value This paper tests whether bank lending relationships (soft information) still matter after accounting for credit ratings (hard information). Additionally, this study measures the extent to which information sharing by data services bureaus, a proxy for informational efficiency, has increased allocation efficiency in the small-business loan market.
ABSTRACT We move beyond the all or nothing purchasing power parity (PPP) proposition that has bee... more ABSTRACT We move beyond the all or nothing purchasing power parity (PPP) proposition that has been the norm in previous literature. We test whether inflation, nominal exchange rate volatility, and trade and financial openness influence the stationarity of real exchange rates on a sample of Latin American and Caribbean countries plus Canada during the post Bretton-Woods era. Countries with high inflation and high exchange rate volatility are more likely to support PPP. Classifying the countries by traditional trade openness is not possible to find stationarity consistent with the findings of Alba and Papell (2007) that more open countries are more likely to support PPP. However, when trade openness is parameterized by “relative weight trade intensity” (RWTI), which provides a bi-dimensional approach to international trade weight, we find that higher trade openness leads to higher support of PPP. Westerlund (2007) cointegration error correction model (ECM) tests in panels indicate that financial openness supports PPP only when national debt is not considered. Financially open countries and those that open their borders to trade are more likely to have a mean reversion of exchange rates. These outcomes are relevant to emphasize the benefits of trade and financial openness in economies close to the United States.
DOAJ (DOAJ: Directory of Open Access Journals), Mar 1, 2011
ABSTRACT This article investigates how recent failures of seven publicly-traded commercial banks ... more ABSTRACT This article investigates how recent failures of seven publicly-traded commercial banks and the banking crises of 2008 affect the wealth, the systematic and nonsystematic risk, and total risk of commercial banks. We find that the total risk of medium-sized banks is slightly more affected by the turbulence in the financial sector than larger banks. The changes in wealth are positive overall and marginally significant. Taken as a whole, the results indicate that at the end of 2008, the major consequences of the bank failure events are reflected in the level of risk and in modest changes in wealth. There is some indication that investors differentiate which bank type has more exposure, which consequently increases the risk of banks with similar characteristics as the failed banks. The best hedging strategy should therefore consider the inclusion of medium-size federally chartered banks, large banks, and money centers with a state charter only. Our results imply that regulators should more closely monitor bank holding companies based on size and charter type particularly during financial turbulence.
This article attempts to provide a comprehensive overview of the Eastern Cuba Baptist Theological... more This article attempts to provide a comprehensive overview of the Eastern Cuba Baptist Theological Seminary within the larger context of theological education in Cuba. Three major purposes directed the research reported in this paper. The first purpose was historical: to document and evaluate the rise and achievements of the Eastern Cuba Theological Seminary, which has continued its mission through extraordinary
Purpose
This paper examines the effect of managerial insider trading on analyst forecast accuracy... more Purpose This paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion, and bias. Specifically, we test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, we examine this relationship around Regulation Fair Disclosure (FD) and the Galleon insider trading case.
Design/methodology/approach We employ pooled OLS regressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors. We regress our proxies for forecast precision on alternative measures of insider trading activities and a vector of control variables.
Findings Insider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion, and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts’ independent opinion and increases the precision of their forecast.
Practical implications Regulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using internet sources with direct release to the public to ensure a more timely information dissemination.
Originality/value We document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the SEC prohibited the selective disclosure of material non-public information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.
We find partial support for a permanent increase in firm value following U.S. cross-listings. Cro... more We find partial support for a permanent increase in firm value following U.S. cross-listings. Crosslisted firms with capital-raising intentions on U.S. exchanges and firms cross-listing after the Sarbanes-Oxley Act exhibit an increase in firm value. Yet, investors are worse off in the long run when owning insider-controlled cross-listings. Compared to non-insider-owned cross-listings, insider-owned firms have a greater rise in value around the cross-listing year but also a larger decline in the post-cross-listing years. In fact, insider-owned firms lose value by the fifth year, compared with their value before cross-listing. Lastly, we show that liquidity and visibility enhance the value of cross-listings.
The Quarterly Review of Economics and Finance., 2016
The well-documented information content of dividends is contingent on the firm’s corporate govern... more The well-documented information content of dividends is contingent on the firm’s corporate governance. Using cross-listing events, we find that firms reach a new equilibrium dividend policy after a shift in the level of shareholder protection and the direction of the dividend adjustment depends on the pre-cross-listing locus of control. Exchange-traded cross-listings can afford to decrease dividend payouts as they substitute dividends with better corporate governance. However, dividend distributions and the likelihood to pay dividends increase when cross-listings are controlled by insiders, supporting the signaling hypothesis. The cross-listing level
PurposeThe authors measure the cost of equity to earnings yield differential for a sample of 2,03... more PurposeThe authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if the cost of equity to earnings yield differential is related to dividend policy in the manner predicted by agency theory.Design/methodology/approachAgency theory says a firm's optimal dividend policy is partially determined by the relationship between the earnings yield and the cost of equity capital. When the cost of equity is higher (lower) than the earnings yield, firms are motivated to (not) pay dividends as this reduces the cost of capital and holding other things constant, increases corporate valuations. The authors test whether managers set dividend policies to maximize the value of the firm.FindingsThe study’s findings show that when the cost of equity is higher (lower) than earnings yield, firms are more (less) likely to be dividend payers and the payouts are higher (lower). The results...
We provide consistent evidence that financial analysts employ publicly-available insider-trading ... more We provide consistent evidence that financial analysts employ publicly-available insider-trading information in the six months prior to making their earnings forecasts to enhance the accuracy of their forecasts. Specifically, we document that firms with increased insider ownership in the six months leading to the forecast issues enjoy significantly better recommendation from analysts compared to firms with unchanged or decreased insider ownership. The results uncover a relevant source of information which complements analysts’ independent opinion and increases the value of their forecast. Through this process, capital markets become more efficient as insiders’ beliefs are disseminated to the public through an additional channel in the form of analysts’ guidance, thereby supporting prior work positing that insider trading enhances market efficiency. The influence of insider trading on forecast accuracy is more robust among non-high-tech sectors, which dissipates during the post-Galle...
This study evaluates the effect of the Capital Purchase Program during the 2008-2009 financial cr... more This study evaluates the effect of the Capital Purchase Program during the 2008-2009 financial crisis on the cost of equity of 170 publicly listed banks in the United States that received funding. We document robust evidence that the liquidity provided by the government bailout reduced the cost of equity for recipient banks, especially for those banks that repaid their bailout funds in full. The decrease in the cost of equity is particularly significant for banks with high market-to-book ratios, low concentrations of institutional ownership, and those with at least one large blockholder. Our findings have important implications for the assessment of government bailout programs and future regulation of financial institutions.
Purpose Using the small-business loan market, this paper aims to test whether a structural shift ... more Purpose Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital. Design/methodology/approach This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues. Findings The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of cred...
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This paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion, and bias. Specifically, we test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, we examine this relationship around Regulation Fair Disclosure (FD) and the Galleon insider trading case.
Design/methodology/approach
We employ pooled OLS regressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors. We regress our proxies for forecast precision on alternative measures of insider trading activities and a vector of control variables.
Findings
Insider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion, and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts’ independent opinion and increases the precision of their forecast.
Practical implications
Regulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using internet sources with direct release to the public to ensure a more timely information dissemination.
Originality/value
We document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the SEC prohibited the selective disclosure of material non-public information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.
This paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion, and bias. Specifically, we test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, we examine this relationship around Regulation Fair Disclosure (FD) and the Galleon insider trading case.
Design/methodology/approach
We employ pooled OLS regressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors. We regress our proxies for forecast precision on alternative measures of insider trading activities and a vector of control variables.
Findings
Insider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion, and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts’ independent opinion and increases the precision of their forecast.
Practical implications
Regulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using internet sources with direct release to the public to ensure a more timely information dissemination.
Originality/value
We document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the SEC prohibited the selective disclosure of material non-public information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.