Nancy Mohan

Discount rate changes, stock market returns, volatility, and trading volume: Evidence from intraday data and implications for market efficiency

We examine the eAect of discount rate changes on stock market returns, volatility, and trading volume using intraday data. Equity returns generally respond negatively and significantly to the unexpected announcements; however, the eAect of expected changes on equity returns is insignificant. Furthermore, our results indicate that equity prices respond to announcements within the trading period/hour after the information release. An indication of a return reversal is too small to cover the full transaction costs. Unexpected discount rate changes also contribute to higher market volatility although the volatility is short-lived. Similarly, unexpected changes in discount rates induce larger trading volume while expected changes do not. Abnormal trading volume occurs only in period t. Our results also support the notion that unexpected changes in the discount rates impact market returns irrespective of the Federal Reserve operating procedures. ” 1999 Elsevier Science B.V. All rights reserved.

Underwriter Spread, Underwriter Reputation, and IPO Underpricing: A Simultaneous Equation Analysis

This paper studies the relationships between underwriter reputation, underwriter spread, and IPO underpricing. We consider the information content of underwriter spread and find that it conveys information pertinent to IPO quality. Because underwriter spread is endogenous, underpricing and underwriter spread are jointly determined in a simultaneous equation system. Also, we examine the IPO market for evidence of segmentation, and our results suggest some market segmentation. Underwriter spread impacts initial underpricing for a group of medium-reputation underwriters, while underpricing affects underwriter spread for groups of low- and high-reputation underwriters. Consequently, high-risk IPOs may not be priced the same way as low-risk IPOs. We attribute this finding to regulation, competition, and/or market segmentation.

Are IPOs Priced Differently Based Upon Gender

Differences between male and female management style, risk aversion, investment strategies, and financial decision making can be found in economic, management, psychology, and social literature. There are no published studies, however, linking gender issues with valuation. In this article, we consider differences in pricing female- versus male-led initial public offerings. Specifically, we find no difference in firm characteristics between a female-led and a male-led IPO, and no difference in underpricing between male-led and female-led IPOs after controlling for firm-specific variables. Our evidence suggests that in a market such as IPOs, where subjects share more similar opportunity sets, wealth, and knowledge, gender bias does not exist.

Information content of lock-up provisions in initial public offerings

Abstract An overwhelmingly large proportion of initial public offerings (IPOs) report lock-up provisions that prohibit existing stockholders from selling their shares within a specified period after the offering date. These lock-up periods may last as long as 3 years. Because influential buyers request the lock-up, we conjecture that the length conveys credible information pertinent to the risk of the IPO. Analyzing 729 IPOs from January 1990 to December 1992, we found that the lock-up period signals the issuers riskiness and that a 180-day lock-up period seems to be the norm. Any departure from the norm suggests more uncertainty about a firms value and thus results in deeper IPO underpricing as well as a larger underwriter spread. We also found that thin-trading activity occurring shortly after the expiration of the lock-up period is perceived by the market as good news, while heavy trading is regarded as bad news.

Timing the Disclosure of Information: Management's View of Earnings Announcements

Do managers think the timing of earnings announcements is significant? We surveyed top management on issues pertaining to this question and report the results in this article. About 50% of the firms responding maintain a fixed earnings announcement schedule (they release information on the second Friday after the close of a quarter, for example). Firms that vary announcement timing report that earnings levels that are unexpected have the most impact on the timing decision. Lower-than-expected earnings are more likely than higher-than-expected earnings to prompt a change in timing, and change of announcement date tends to happen more often than change in the time of release during the day. It is interesting that the pending release of economic or market information plays little role in determining when to announce earnings. Sample partitioning reveals that small firms and NASDAQ-traded firms are more likely to change announcement schedules than large firms or firms trading on the NYSE. These results may be interesting to analysts who might consider the timing of earnings announcements to be important information, to managers who may wonder whether timing of information disclosure is a common practice among their peers, and to academicians who can compare these survey results to other findings.

Influence of firm performance and gender on CEO compensation

In this article we continue the examination of top executive pay by comparing performance, total pay and the influence of CEO gender. We analyse compensation differences between male and female CEOs using nonparametric analysis. We calculate the potential compensation for each executive using two benchmarks. First, each executives performance and compensation are evaluated relative to members of the same gender to produce a same-gender measure of under-compensation. Each executives compensation is also benchmarked against the other genders potential compensation, producing an other-gender measure of under-compensation. Together, both measures allow an analysis of the gender-specific potential salaries of each executive while controlling for performance. The approach is applied to a sample of male and female executives. The results indicate that women are under-compensated.

Sovereign Wealth Funds: Investment and Governance Practices

Sovereign wealth funds (SWFs) are large, growing, and concentrated investment vehicles, with a current estimated value of U.S.

The German reunification, changing capital market conditions, and the performance of German initial public offerings

3 trillion. The combination of low transparency and government ownership has raised questions about political agendas, national security, and transfers of technology. In this article the authors report on the current status of SWFs in terms of investments, regulation, governance, and transparency of activities. They also review some recent studies on SWF investments and their impact on financial markets.

The Impact of the Sarbanes–Oxley Act on Firms Going Private

This paper examines the performance of 103 German initial public offerings (IPOs) that went public during the early years of the German reunification. Although IPOs generated positive initial returns, on average they performed poorly in the long-run. The period starting immediately before reunification and ending in early 1994 is characterized by changing market sentiments. The research shows that risk, initial returns, and aftermarket trading of IPOs are affected by prevailing market sentiments.

Asset Allocation Managers' Investment Performance

We study the impact of Sarbanes-Oxley Act (SOX) on the characteristics of firms going private based upon a sample of 147 companies during the period of June 13, 2000 to October 3, 2003. We partition the sample into pre-SOX and post-SOX periods, and cluster analysis is employed to identify firms with similar characteristics. One group of firms is identified before the Sarbanes-Oxley Act, while two groups of firms are identified after the Act. Parametric and non-parametric tests confirm a small group of firms going private with characteristics consistent with the contention that Sarbanes-Oxley Act drives these firms private due to heavy monitoring cost.