Jarl G. Kallberg

The value of private sector business credit information sharing: The US case

This paper investigates the value added by private information exchanges that share information on business payment performance. We discuss how this information is collected and disseminated by the worlds largest private information broker, Dun & Bradstreet. We provide the first empirical examination of the importance of this information at the lending decision level. Our findings indicate that exchange-generated information provides significant explanatory power in failure prediction models controlling for other credit information that is easily available to lenders. Our study complements the work of Jappelli and Pagano [Information sharing, lending and defaults; Cross country evidence, Centre for Economic Policy Research, Discussion Paper 2184, 1999] who find in cross-country macro level tests that information exchanges add value. � 2003 Elsevier Science B.V. All rights reserved.

The Role of Real Estate in the Portfolio Allocation Process

This study explores the role of direct real estate investment in a portfolio context incorporating the real estate imperfections of indivisible assets and no short sales. Mean-variance efficient portfolios are calculated using Treasury-bills, bond and equity indices together with cash flows and appraised values from a set of twenty-two properties having an aggregate appraised value of

The Value Added from Investment Managers: an Examination of Funds of REITs

336 million. Real estate diversification benefits are shown to be the greatest with smaller properties and are most advantageous at higher target levels of return. The study suggests that a 9% allocation to real estate is optimal, rather than the 20% figure suggested in other studies.

An Analysis of REIT Security Issuance Decisions

This paper empirically analyzes REIT mutual funds. We show that, contrary to mostmutual fund studies, the average and median alphas (net of expenses) are positive. We also findthat time-varying positive alphas are much more likely to occur when the real asset market is performing poorly, suggesting that managers add more value in down markets than in up markets. We examine the cross-sectional determinants of both standard alphas and the average of time-varing alphas and find that both increase with assets and turnover. Cross-sectinally, we find that actively managed funds have higher alphas than passively managed funds.

Regime Shifts in Asian Equity and Real Estate Markets

This article tests the ability of traditional capital structure theories to explain the issuance decisions of real estate investment trusts (REITs). For issuances made between 1997 and 2006, we find strong support for the market timing theory of capital structure. Controlling for past returns and growth, a REIT is more likely to issue equity when its price-to–net asset value ratio is high. This suggests that REITs issue equity in public markets when the cost of equity capital is lower in the public market than in the private market. Consistent with traditional market timing, REITs are more likely to issue equity after experiencing large price increases. We also find some support for REITs following the trade-off theory of capital structure. REITs are less likely to issue debt when proxies for expected bankruptcy costs are high.

The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts

This paper applies a new statistical technology for identifying regime shifts to analyze recent data on real estate and equity markets in eight developing Far Eastern countries in the 1992-1998 time period. We find that regime shifts in volatility occur in the summer of 1997; however, most of the regime shifts in returns occur in the spring of 1998. While the clustering of regime breaks does not seem to follow any obvious pattern, the countrys exposure to trade and firm leverage are important. An analysis of Granger causality suggests that, in most cases, equity returns cause real estate returns but the converse is not true. We also find two-way causality in volatility, suggesting that a common factor drives volatility in these markets. Finally, we provide evidence that the regime shifts generally imply higher relative risk for real estate securities after the estimated breaks. Copyright 2002 by the American Real Estate and Urban Economics Association.

Testing the Adequacy of Markov Chain and Mover-Stayer Models as Representations of Credit Behavior

This study analyzes the impact of corporate governance structures at the initial public offering (IPO) date. We test hypotheses that firms with more shareholder‐oriented governance structures receive higher valuations at the IPO stage and have better long‐term performance. Our sample is a set of 107 IPOs of real estate investment trusts (REITs) between 1991 and 1998. Using a single industry and REITs in particular reduces potentially confounding effects due to differences in risk, transparency, and growth potential. We believe this—combined with our use of IPOs—mitigates the endogeneity problem present in studies of the impact of governance on seasoned firms’ valuation. Our analysis indicates that firms with stronger governance structures have higher IPO valuations and better long‐term operating performance than their peers.

An Examination of the Asian Crisis: Regime Shifts in Currency and Equity Markets

We summarize methodology for testing the compatibility of discrete time stochastic processes-stationary and nonstationary Markov chains and an extension, the mover-stayer model-with longitudinal data from an unknown empirical process. We apply this methodology to determine the suitability of these models to represent the payment behavior of a sample of retail revolving credit accounts. We are led to reject stationary and also nonstationary Markov chain models for our data and for our state space definition in favor of the mover-stayer model. The mover-stayer model, in contrast to Markov chains, incorporates a simple form of population heterogeneity. Stationary Markov chains have been used extensively in finance literature to model payment behavior of credit accounts. Our empirical study suggests, however, that stationary Markov chains may not appropriately model payment behavior. It also indicates that incorporating heterogeneity in modeling payment behavior may be more important than incorporing nonstationarity.

Convertible calls and corporate taxes under asymmetric information

Using a nonparametric technique for the identification of regime shifts, we find breaks in the structural relations between currency and equity returns and return volatility in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand during the recent Asian crisis. Volatility breaks occurred in late 1994 and 1997, while return breaks were concentrated in early 1998. After the estimated breaks, many Asian equity markets became more responsive to the volatility of the corresponding domestic exchange rate. We find that information spillover and portfolio rebalancing, rather than common information shocks, represented major channels for the transmission of breaks across countries.

Preferred Stock: Some Insights into Capital Structure

Abstract This paper develops a signalling model of call of convertible securities (bonds or preferred stock) in the presence of corporate taxes and asymmetric information about future earnings. In equilibrium, managers with relatively unfavorable information call to force convertible holders to convert to common stock (in spite of the loss of corporate tax benefits if the convertibles are bonds), while those with relatively favorable information do not call. The model predicts that the announcement period common stock returns are more negative at the call of convertible bond than at the call of convertible preferred stock. Furthermore, we predict that when the importance of the tax deductibility of interest differs among firms, so does the stock price reaction to the announcement of convertible debt call. Specifically, the loss of equity value at the announcement decreases with the amount of non-debt tax shield that the calling firm owns, decreases with the book value of convertible debt called, and increases with corporate taxes.