Dwight C. Anderson

Diversification Benefits of iShares and Closed-End Country Funds

We study the performance and diversification of iShares and their rival closed‐end country funds from April 1996 to December 1999. International iShares are country‐specific series of securities that track the price and yield of a specific Morgan Stanley Capital Internation (MSCI) country index and, presumably, should provide diversification benefits. Our single‐index model demonstrates that iShares replicate the home index, showing some potential for diversification. However, our two‐factor model, which isolates the “true” diversification virtues, documents that both iShares and closed‐end country fund market prices maintain considerable exposure to the U.S. market. Furthermore, the net asset value returns of the closed‐end funds demonstrate a strong home country exposure, suggesting there is no substitute for direct foreign investment.

The Effect of Golden Parachutes on Shareholder Wealth and Takeover Probabilities

This study seeks to determine whether stockholders experience increases in wealth due to a companys adoption of a golden parachute and resulting increased takeover bid probability. Market reaction to golden parachute adoption is examined by employing event analysis, logit analysis and metric regression. Our findings indicate that the adoption of a golden parachute does not signify an increased probability of a takeover bid, and stockholders experience a decrease in wealth. Copyright Blackwell Publishers Ltd 1997.

Stock price reactions to increases in loan-loss reserves: A broader perspective

Loan loss reserves (LLR) provide a cushion to absorb operating losses. Several studies have focused on the markets reaction to increases in LLR in response to a specific event related to the international debt crisis. This study takes a broader view of LLR by examining, over a six year period, the markets reaction to announcements of increases to LLR that are above the expected annual reserve and that are a result of factors other than the international debt crisis. We find a negative reaction in the market, indicating that the negative signal from identifying unanticipated risk in the loan portfolio appears to dominate the positive cash flow effects.

Stock Market Reactions To the Tax Reform Act of 1986: an Analysis of the Agribusiness Industry

This study assesses the impact of tax legislation on the agribusiness industry by examining security price behavior at major stages in the development of the Tax Reform Act of 1986. The findings of the study indicate that investors in agribusiness firms responded negatively to proposed tax changes as the legislation evolved. The market reaction to the legislative developments indicates that tax-driven investment in the agribusiness industry will be significantly reduced.

Oil and gas stock price reactions to federal tax legislation

The purpose of this research is to assess the effects of major tax legislation on the stock prices of firms in the oil and gas industry. Event study methodology is used to examine the behavior of security prices of oil and gas firms in response to the Joint Conference Committee vote in August 1986.