Elaine Hutson

Volatility in stocks subject to takeover bids: Australian evidence using daily data

Using daily price and volume data on 112 of the largest takeover targets in Australia during the period 1985 to 1993, we find that conditional price volatility declines after the takeover announcement. This decline is greatest for targets of cash bids and smallest for targets of share-exchange bids. We argue that the phenomenon is due to convergence of trader opinion regarding the value of the target stock, and reflects a change in the price formation process that has not hitherto been recognised. Our findings have implications for event studies of takeovers that inappropriately assume a time-invariant risk-return relation, and also for regulatory policies in the market for corporate control.

The Asian financial crisis and the role of the IMF: A survey

Abstract This paper begins with a commentary on the unfolding of the Asian crisis, and includes summary information on the effect of the crisis on the rate of economic growth and unemployment in the region. A review of current thinking on the causes of the crisis follows. This review evaluates whether the Asian crisis was caused primarily by weaknesses in the affected economies, such as inappropriate exchange rate policies and inadequate financial regulation, or by international market failures. The paper concludes with a critical analysis of the International Monetary Funds role in the crisis.

Concordance in global office market cycles

Stevenson S., Akimov A., Hutson E. and Krystalogianni A. Concordance in global office market cycles, Regional Studies. A large proportion of international real estate investment is concentrated in the office markets of the worlds largest cities. However, many of these global cities are also key financial services centres, highlighting the possibility of reduced economic diversification from an investors perspective. This paper assesses the degree of synchronization in cycles across twenty of the worlds largest office markets, finding evidence of significant concordance across a large number of markets. The results highlight the problems associated with commonalities in the underlying economic bases of the markets. The concentration of investment also raises the possibility of common flow of funds effects that may further reduce diversification opportunities.

Firm-level internationalisation, regionalism and globalization

Covering the key issues in regionalism and globalization, this volume provides an in-depth review of topics such as outward FDI, internationalization and performance, human resources, knowledge and networks, corporate governance and international joint ventures. Through their selection of material, the editors present an overview of the most up-to-date research and aim to stimulate ideas and promote further research into this dynamic and exciting area.

Drivers of External Equity Funding in Small High‐Tech Ventures

Financing is one of the major issues affecting the success and survival of entrepreneurial ventures. Theory suggests that due to information asymmetry between owners and investors or lenders, there is a “pecking order” of financing preferences, whereby retained earnings is preferred to debt, and outside equity is seen as a last resort. In high‐tech ventures, however, outside equity financing is more commonly used than debt, but the reasons for this are not yet well‐understood. We develop hypotheses to examine this theory‐practice gap, which we test using a sample of private high‐tech firms of various ages. We find that the greater the owners perception of information asymmetries in debt markets, the larger the proportion of external equity in the firms capital structure. As our sample firms age, their use of external equity relative to other sources of finance diminishes. We also find a positive relationship between the use of external equity and the firms initial investment. Last, we show that the greater the perception amongst founders that obtaining external equity sends a positive signal, the greater its use. We discuss the implications of these findings and offer suggestion for future research and practice.

Managed Exchange Rates, Dual Listing, and Foreign Exchange Exposure: The Experience of Chinese Banks Around the Financial Crisis

Using daily equity price data, we find that most of the 14 Chinese listed banks are highly exposed to the RMB/USD exchange rate. By breaking our data period into two subperiods around the financial crisis, we find that Chinese banks were even more exposed in the post-crisis period, despite the fact that the renminbi reverted to a de facto peg against the dollar in September 2008. This cannot be explained by direct foreign exchange exposure, and we argue that Chinas banks are subject to substantial indirect exposure as a result of concerns about their loan books in the face of anticipated further appreciation of the RMB. We also find that the exchange rate sensitivities of the twin shares of dual-listed Chinese banks (those listed in China and Hong Kong) are very different – not only in magnitude but also in sign. We discuss two possible explanations for this: investor sentiment and ‘hot money’ inflows into China.

The Evolution of the Managed Funds Industry: Investment Trusts in Nineteenth-century Britain

The stock market globalization process has produced historic changes in the structure of stock markets, the effects of which are evident throughout the world. Despite these transformations, there are relatively few sources examining the connections between the globalization process currently under way and previous periods of stock market globalization. This seminal volume fills that gap.

Firm-level internationalization, regionalism and globalization

Covering the key issues in regionalism and globalization, this volume provides an in-depth review of topics such as outward FDI, internationalization and performance, human resources, knowledge and networks, corporate governance and international joint ventures. Through their selection of material, the editors present an overview of the most up-to-date research and aim to stimulate ideas and promote further research into this dynamic and exciting area.

Chapter 5 How Useful is the Stage Model Theory in Explaining the Capital Structure of Venture Capital-Backed and Non-Venture Capital-Backed Firms?

Policymakers have long supported the development of venture capital markets on the basis that venture capital fills a perceived gap in the availability of early stage seed capital funding for new technology-based firms (NTBFs).1 Support from policymakers, however, has not been matched by academic research on NTBF financing. This is a major concern because NTBF financing is not well understood. The theoretical focus of this chapter is the life cycle or stage model of financing, which has proved the dominate paradigm in the analysis of financing in NTBFs. It is particularly relevant to this study, as the stage model is explicitly endorsed by venture capitalists who structure deals in phases in order to effectively monitor the investee firms progress (Sahlman, 1990).

Chapter 11 The High-Technology Pecking Order in Spinoffs and Non-SpinoffsTeresa Hogan and Elaine HutsonThe High-Technology Pecking Order in Spinoffs and Non-Spinoffs in the Irish Software Sector

Despite their increasing importance in innovation, employment creation and economic growth, there is a dearth of theory-driven research on the financing and capital structure of new technology-based firms (NTBFs).1 Hogan and Hutson (2005a) advance the High-Technology Pecking Order Hypothesis (HTPOH) to explain the role of equity in the financing of NTBFs in the software product sector. The HTPOH posits that NTBFs exhibit a hierarchical pattern of financing that gives precedence to internal sources, but if external financing is required, equity is preferred to debt. This study investigates the extent to which the genesis of the NTBF affects its financing patterns?