Abstracts of Volume 39, Number 4, November 2004
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Manohar Singh, Ike Mathur and Kimberly C. Gleason
Stock
Returns and the Business Cycle
Michael DeStefano
The Impact of Regulation Fair Disclosure on Information
Asymmetry and Trading: An Intraday Analysis
Chiraphol N. Chiyachantana, Christine X. Jiang,
Nareerat Taechapiroontong and Robert A. Wood
Bank Loan Availability and Trade Credit Demand
Morris G. Danielson and Jonathan A. Scott
Manohar Singh, Ike Mathur and Kimberly C. Gleason
Recent research focuses on explaining the
diversification discount. However, there is little
direct evidence regarding the relation among ownership
structure, corporate governance, and corporate
diversification. The results in this paper suggest that
agency issues do not account for firms adopting a
particular diversification strategy. Also, the
performance consequences of the shift in the
diversification strategy and the subsequent changes in
institutional and block ownership structures are not
related to agency issues. In fact, investors seem not to
avoid diversified firms per se. We suggest that observed
board and ownership differences between diversified and
focused firms are due to their being at different stages
of corporate evolution.
Keywords: diversification discount; diversification
strategies; corporate governance; board of directors
Stock
Returns and the Business Cycle
Michael DeStefano
This paper examines whether movements in economic
factors dictated by the dividend discount model can
explain broad movements in stock returns over the
business cycle. As anticipated, stock returns decrease
throughout economic expansions and become negative
during the first half of recessions. Returns are largest
during the second half of recessions, suggesting an
important role for expected earnings. These results are
consistent with the notion that expected stock returns
vary inversely with economic conditions, yet suggest
that realized returns are especially poor indicators of
expected returns prior to turning points in the business
cycle.
Keywords: stock, returns, determinants, business, cycle,
conditions
The Impact of Regulation Fair Disclosure on Information
Asymmetry and Trading: An Intraday Analysis
Chiraphol N. Chiyachantana, Christine X. Jiang,
Nareerat Taechapiroontong and Robert A. Wood
This study examines the impact of Regulation Fair
Disclosure (FD) on liquidity, information asymmetry, and
institutional and retail investors trading behavior. Our
main findings suggest three conclusions. First,
Regulation FD has been effective in improving liquidity
and in decreasing the level of information asymmetry.
Second, retail trading activity increases dramatically
after earnings announcements but there is a significant
decline in institutional trading surrounding earnings
announcements, particularly in the pre-announcement
period. Last, the decline in information asymmetry
around earnings announcements is closely associated with
a lower participation rate in the pre-announcement
period and more active trading of retail investors after
earnings releases.
Keywords: Regulation Fair Disclosure, volatility,
liquidity, adverse selection costs
Bank Loan Availability and Trade Credit Demand
Morris G. Danielson and Jonathan A. Scott
This paper investigates the effects of bank loan
availability on the trade credit and credit card demand
of small firms, using firm-level data from the 1995
Credit, Banks, and Small Business Survey, conducted by
the National Federation of Independent Business. We find
that firms increase their demand for trade credit and
credit card debt when facing credit constraints imposed
by banks. These results provide evidence of a pecking
order of debt financing, where firms increase their
reliance on potentially expensive sources of funds when
bank loans are not available.
Keywords: small business, trade credit, credit
availability
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