George P. Tsetsekos

State intervention in the market for corporate control : The case of Pennsylvania Senate Bill 1310

Abstract This study investigates the impact of Pennsylvania Senate Bill 1310 on the share prices of Pennsylvania corporations. Considered the most severe of the second-generation antitakeover laws, the statute limits the ability of shareholders to challenge management through the proxy process and eliminates the traditional fiduciary obligation of directors to promote shareholders interests. We find that PA SB1310 significantly decreased share values, and estimate the loss to shareholders of Pennsylvania firms at

The Information Content of Plant Closing Announcements: Evidence From Financial Profiles and the Stock Price Reaction

4 billion. However, firms with antitakeover charter amendments already in place were less affected, and firms that exempted themselves from PA SB1310 recovered a portion of shareholders wealth.

The Structure of Derivatives Exchanges: Lessons from Developed and Emerging Markets

This study demonstrates that a plant closing announcement provides information not just for the plant being closed but also for other operations and the firm as a whole. An examination of changes in firm financial condition following the announcement indicates problems that are firm-wide, not just plant-specific. Firms announcing plant closings experience a decline in profitability during the announcement year and the following year as well as declines in employment, asset acquisition, and dividend growth for the years following the announcement. The stock price reaction to closing announcements is found to be negative and statistically significant with a greater negative reaction for plants that are more closely related to firm operations, and for plants that comprise a larger portion of the firms operations.

The differentiation of 'emerging' equity markets

The authors examine the architecture, elements of market design, and the products traded in derivatives exchanges around the world. The core function of a derivatives exchange is to facilitate the transfer of risk among economic agents by providing mechanisms to enhance liquidity and facilitate price discovery. They test the proposition that organizational arrangements necessary to perform this function are not the same across markets. They also examine the sequencing of products introduced in derivatives exchanges. Using a survey instrument, they find that: a) Financial systems perform the same core functions across time and place but institutional arrangements differ. b) The ownership structure of derivatives exchanges assumes different forms across markets. c) The success of an exchange depends on the structure adopted and the products traded. d) Exchanges are regulated directly or indirectly through a government law. In addition, exchanges have their own regulatory structure. e) Typically (but not always) market-making systems are based on open outcry, with daily mark-to-market and gross margining -- but electronic systems are gaining popularity. f) Several (but not all) exchanges own clearing facilities and use netting settlement procedures. As for derivative products traded, they find that: i) Although most of the older exchanges started with (mainly agricultural) commodity derivatives, newer exchanges first introduce financial derivative products. ii) Derivatives based on a domestic stock index have greater potential for success followed by derivatives based on local interest rates and currencies. iii) The introduction of derivatives contracts appears to take more time in emerging markets compared with developed markets, with the exception of index products.

Asymmetric information, investment banking contracts and the certification hypothesis☆

We argue that emerging security markets, as defined by IFC, have characteristics differentiated from their counterparts in industrialized nations not only due to differential levels of economic development, but also because their origins are more recent. Consequently, the institutional infrastructure comprising a broad legal framework recognizing property rights, disclosure requirements, accounting practices conforming to international standards, supervision and regulation of these markets, may be inadequate or even absent in emerging markets. Our study develops a positive (descriptive) framework of the qualitative (institutional infrastructure) and quantitative features that classifies and predicts the relative development of securities markets across countries. Discriminant and logit analyses using IFC data indicate that the emerging equity markets as a class are dissimilar from developed markets. These findings lend support to the premise that the two sets of markets are segmented. There is weak evidence of convergence in the characteristics of the two sets of markets. However, it is expected that as the institutional infrastructures in emerging markets improve, there will be stronger evidence of the trend towards convergence in these markets.

Managerial ownership and stock price reaction to bond downgrades

Abstract This study posits a hierarchy of investment banking contracts reflecting differential levels of certification. The analysis supporting the existence of this hierarchy is based on the reputational capital paradigm. The firm commitment-negotiated arrangement is perceived to have the highest quality of certification, followed by the firm commitment-competitive, best efforts-negotiated and best efforts-competitive arrangements in that order. The existence of this hierarchy is investigated by measuring market reactions to the announcements of such issues. The empirical results reveal sharp distinctions between firm commitment and best efforts contracts. However, within firm commitment contracts, signalling between negotiated and competitive arrangements is attentuated and the distinction is weak.

An examination of open market stock repurchases: cash flow signalling, investments, and Tobin's Q

Research has documented that announcements of bond downgrades and the magnitude of managerial holdings provide independently information about the firms value. This study explores the link between bond downgrade-induced abnormal returns and managerial ownership. Results show that the stock price reaction to announcements of bond downgrades is more negative for owner-controlled firms than for management-controlled firms. The difference is not explained by any performance differences of firms prior to the announcement of downgrades, but is associated with possible managerial entrenchment

Regaining Access to Capital Markets: An Overview of Issues and Strategies

This paper examines the information content of repeat open market repurchase announcements, the impact of investments and R&D expenditures on the stock repurchase induced returns, and the competitiveness of firms involved in repeat repurchases. We test the proposition that the market reaction to announcements of repeat repurchases is different from that to first-stage repurchases. First-stage repurchase announcements convey positive information regarding a firms future prospects. Because of pooling information across different quality firms, however, only repeat repurchase announcements may distinguish firms according to their true cash flow potential. Results supporting the cash flow signalling hypothesis indicate that the valuation effect of open market repurchases is positive across cohorts of repurchase announcements, independent of the firms investment and R&D level, and that firms with repeat repurchases do not decline in competitiveness measured by Tobins Q.

Sovereign Debt Restructurings: The Case of Venezuela—Issues and Challenges

This article discusses issues related to regaining market access for countries that have undergone sovereign debt restructurings. Defaults and restructurings may have adverse consequences for the debtor government’s access to capital post-crisis, leading to exclusion from capital markets and higher interest premia. However, the empirical evidence on this matter is inconclusive. While some earlier contributions conclude that default premia in sovereign credit markets are negligible, particularly in the medium and long run, more recent studies find that debt restructurings can have a substantial and longer-lasting impact on post-crisis market access conditions, with preemptive restructurings being associated with shorter periods of market exclusion. Strategies for regaining market access should be designed carefully, facilitated by enabling domestic macroeconomic and debt management strategies, and implemented when international financial conditions are favorable.

Mutual Fund Governance and Fund Performance

In November 2017, the Venezuela government announced its intention to restructure its sovereign debt. To address the challenges and issues involved, we organized a conference at Drexel University on February 23, 2018, sponsored by the Global Interdependence Center and Drexel University’s LeBow College of Business. Internationally recognized experts, academics, and renowned practitioners representing a variety of institutional perspectives presented complex issues related to the anticipated restructuring and touched upon economic, geopolitical, legal, and market-driven conditions that will impact the success of the restructuring. Although the case of Venezuela’s restructuring is complicated due to political considerations and the current humanitarian crisis in the country, nevertheless it offers a multifaceted review of a sovereign debt restructuring as more countries are expected to restructure their debt in the near future, given the rising interest rate environment. The estimated