M. Wayne Marr

Plant-closing decisions and the market value of the firm

Abstract We investigate the underlying causes and the announcement effects of plant closings. The closing in our sample do not appear related to takeover activity. Instead, they appear motivated by declining firm profitability. Firms announcing closings have lower earnings than market or industry medians; earnings typically improve slightly after the announcement. We find a negative stock-market reaction to plant-closing announcements.

Shelf Registration and the Reduced Due Diligence Argument: Implications of the Underwriter Certification and the Implicit Insurance Hypotheses

Critics argue that shelf registration greatly reduces the ability of underwriters to perform adequate due diligence. This argument suggests underwriters will demand greater compensation for shelf issues compared to such traditional issues as an insurance premium for protection against potential litigation or loss of reputation caused by inadequate due diligence. Our findings suggest the presence of such a premium, that the premium is higher for firms with higher expected due diligence liabilities, and that underwriters perceive that shelf registration erodes due diligence and, subsequently, price the due diligence erosion accordingly. This pricing behavior is consistent with our findings that firms with higher expected due diligence liabilities are more likely to choose traditional registration.

Shelf Registration: Competition and Market Flexibility

SHELF registration of new securities, known as Rule 415, began as an experiment by the Securities and Exchange Commission (SEC) in March 1982 and was permanently adopted in November 1983.1 With this rule companies file a single registration statement for all the securities they plan to issue over the next two years and then sell some or all of the securities whenever they choose. Because the SEC traditionally has prohibited delayed offerings, this is a major change in policy. The reason for this prohibition is the SECs requirement that timely information be available in the offering prospectus. If there is a substantial delay between registration and the sale of the securities, the SEC believes the registration statement will become dated. Investors therefore would base their

On the Integration of International Capital Markets: Evidence from Euroequity Offerings

Euroequity, a new financial instrument, is a new issue of stock by a U.S. firm that is sold simultaneously to investors domestically as registered shares and offshore as bearer shares. In perfectly integrated capital markets, whether Euroequity or domestic equity is issued should not have differential effects on a firms stock price. Like past studies of domestic equity-financing announcements, we find negative stock-price responses for announcements of equity offers. Our findings are consistent with the hypothesis that, during their infancy, new financial instruments which reduce previously effective barriers to investment across national borders enable firms to capitalize on beneficial financing opportunities in overseas markets.

Nonshareholder constituency statutes and shareholder wealth: A note

Abstract We assess the effects of the introduction and passage of state nonshareholder constituency statutes on shareholder wealth. We find a small, but significantly negative effect on shareholder wealth for companies incorporated in states passing nonshareholder constituency statutes that did not already have corporate takeover defenses in place. Further, we find that firms that are poorly managed (as proxied by low market-to-book ratios) react more negatively to the statutes.

Exchange rate movements and the stock returns of U.S. commercial banks

Abstract This article investigates the correlation between exchange rates and the stock returns of a portfolio of commercial banks. The results provide some evidence that bank stocks are, on average, sensitive to foreign exchange rate movements. The results also suggest significant cross-sectional variation in the sensitivity of bank stock returns to exchange rate movements. Similar to a study of U.S. nonfinancial multinationals, this study finds evidence that the relationship of stock returns and exchange rates may be correlated with the degree of the firms foreign operations.

Advance notice of plant closings and firm value

Abstract Prior to the passage of the Worker Adjustment and Retraining Notification (WARN) Act, many argued that mandating minimal advance notice given to employees would reduce managerial flexibility in closing plants, thereby reducing firm values. In addressing this issue, we use 193 closing announcements to examine the stock markets reaction to the amount of advance notice given by the firm when closing a plant. We find no relationship between the amount of advance notice provided and firm value. We also find that the majority of corporations in our sample were providing lengthy advance notice, corroborating statements in the popular press by managers who foresaw no additional burden from the passage of the WARN Act.

Eurobond financing bargains and the clientele hypothesis

Abstract According to the clientele hypothesis advanced by Kim and Stulz (1988), market imperfections may account for the significant positive abnormal returns associated with Eurobond issues during 1975–1985. As predicted, they found that Eurobond interest-cost savings during the period were positively correlated with the associated abnormal returns. Contrary to predictions, however, the savings were smaller than the abnormal returns. One explanation only partially explored by Kim and Stulz is the effect of regulatory differences between the domestic and Eurobond markets. We present complementary evidence suggesting that the clientele hypothesis appears to account for all but the largest abnormal returns, and that and a brief regulatory advantage in issuing Eurobonds in a volatile market could account for the larger-than-expected average abnormal returns.

Effects of securities deregulation in underwriting: An Analysis of SEC Rule 415

In this paper we present evidence on the effects of Rule 415, the SEC Rule that relaxed the SECs long-standing opposition to delayed offerings. Shelf registration allows securities to be offered on a continuous or delayed basis in certain circumstances. We provide evidence on one aspect of the controversy surrounding Rule 415s adoption: the effect of shelf registration on the distribution of underwriting revenues among broker/dealers. We find on average all broker/dealers experienced an increase in underwriting revenues following the adoption of shelf registration due to an increase in total business financing. However, we find that the largest underwriters experienced an increase in underwriting revenues relative to total business financing. The relationship for smaller broker/dealers between underwriting revenues and total business financing did not change significantly after the adoption of shelf registration. Thus, shelf registration appears not do have harmed small broker/dealers.