Leonardo Etro

Market value and corporate debt: the 2006-2010 international evidence

We analyse the differences in the financial debt level of firms both in market-oriented systems (the US, the UK) and bank-oriented systems (Germany, France and Italy) on a sample of 3360 listed companies between the period 2006 and 2010. Results indicate that the debt level is significantly higher in market-oriented systems when compared to the book value of equity. We find confirmation that Book-to-Market (BTM) cannot explain the debt level in bank-oriented systems but, contrary to reference literature, we observe that the BTM ratio has a negative influence on the debt level in market-oriented systems, especially in the United States. We claim different reasons to explain the evidence: (i) the financing standards of market-oriented countries, with an inflationary effect of market values on debt; (ii) an underlying activity for ownership protection and (iii) the unfavourable conditions of stock market over the years of the financial crisis that reduced the convenience of equity issuance.

Corporate social performance and portfolio management

Purpose – The purpose of this paper is to assess the existence of a relationship between socially responsible behavior of companies and price trends of their stocks. Design/methodology/approach – The analysis is conducted by empirically testing data of environmental, social and governance ratings of a sample of European firms between December 2005 and December 2010. A disaggregate analysis is also performed to infer whether a specific contribution of all the different factors that make a business socially responsible can be observed in the value generation process. Findings – The results show that the application of a sustainable approach are successful in creating value, both to the investor and the issuer companies. Research limitations/implications – Findings of this work are significant with respect to portfolio management, because they suggest, on one hand, the myopia of a short-term approach (short-termism), and on the other hand, the importance of sustainable investing. Originality/value – This pap...

Investor protection and value creation in cross-border M&As by emerging economies

Previous research investigating cross-border M&As (CBM&As) by emerging economies (EEs) provided contrasting evidence on the value enhancement role of investor protection rules. We conduct a new empirical study to address the issue with an accurate sample selection of bidders from more homogeneous developing countries and transactions on developed countries only. Our analysis over the 1997–2012 period on a sample of M&A deals by companies from Brazil, Russia, India, China, and South Africa (BRICS) does not provide evidence that better institutional standards in the destination country are rewarded by the local stock market. We find that foreign governance quality is not associated with positive excess stock returns around the announcement date. Rather, these returns are affected by firm-specific and deal-specific factors, such as the relative deal size, the listed status of the target company, and the acquirer size. Comparison with other studies on excess returns for emerging markets (including BRICs) suggests that the results could be driven at least partially by country choice.

International portfolio diversification

In this paper, several empirical tests are applied to evaluate: 1) the effectiveness of international diversified stock portfolios in bull and bear markets; 2) the potential gains of diversification strategies for both developed and developing country investors. The results suggest that the correlation structure of global equity market returns is not constant over time. Correlation coefficients rise during economic crisis and decline again when the crash is over, but do not drop back to the original level as before the crisis. The total risk of foreign investment can be decomposed into the local stock return risk and the currency risk. We also find that US investors accrue potential diversification gains in terms of return enhancement. However, the decrease on return offsets the decrease on standard deviation, making the performance of international portfolios no better than that of domestic investment.

The impact of board independency, CEO duality and CEO fixed compensation on M&A performance

This study aims to examine whether particular corporate governance mechanisms influence the performance of mergers and acquisitions.,Regression analyses investigating 1,596 recent acquisitions in the US market completed over the five-year period from 2009 to 2013 are performed.,The results show that board independency, CEO duality and level of CEO fixed compensation have an impact on the return of acquisitions. Moreover, the findings indicate that acquisitions significantly create value for bidders delivering a positive cumulative abnormal return upon announcement. Finally, also focusing on the 690 relative larger deals, there is a clear evidence of a positive influence of good corporate governance mechanisms over the quality of acquisitions completed.,To our knowledge, this is the first paper trying to identify corporate governance mechanisms related to the best acquisition decisions, by using specifically the three corporate governance variables (CEO duality, CEO fixed compensation and board independency).

Come misurare le performance aziendali sui social media? Una proposta metodologica

italianoIn questo articolo proponiamo un indicatore di performance dell’attivita aziendale sui social media: il Social Media Index (SMI), calcolato attraverso un sistema di scoring della presenza e delle azioni delle imprese sui principali social network. Il quadro di analisi sottostante rappresenta un primo modello per rilevare l’attivita svolta sui social media e per misurare i risultati economico-finanziari conseguenti. Analizziamo inoltre la relazione tra il SMI e le performance azionarie delle 100 imprese a maggiore capitalizzazione quotate presso il London Stock Exchange nel periodo 2011-2013: dai primi dati, le imprese che investono con maggiore efficacia sui social media sono quelle con la migliore performance azionaria. EnglishIn this paper we propose a performance indicator of the business activity on social media: the so-called Social Media Index (SMI), calculated through a scoring system of firms’ presence and actions on main social networks. The underlying analytical framework is a first model to assess the activity carried out by firms on social media and to measure their economic and financial results. Furthermore, we analyse the relationship between the SMI and equity performance of the 100 largest capitalized companies listed on the London Stock Exchange from 2011 to 2013. Based on preliminary evidence, the companies that invest more effectively on social media are those with the best share performance.