Narayanan Jayaraman

The impact of international cross listings on risk and return: The evidence from American depository receipts

Abstract This paper examines the impact of the listing of American Depository Receipts (ADRs) on the risk and return of the underlying stocks. We find that the listing of ADRs is associated with positive abnormal returns to the underlying stock on the listing day. In addition, our results suggest that the listing of ADRs are associated with permanent increases in the return volatilities of the underlying stocks. We interpret this evidence as consistent with the existence of informed traders in the markets in which the ADRs and the underlying stocks trade.

CEO founder status and firm financial performance

Founders create their organizations, yet are often expected to eventually become liabilities to these same organizations. Past empirical research on the relationship between CEO founder status (i.e., is the CEO also the founder?) and firm performance has yielded inconsistent results. This study of 94 founder‐ and nonfounder‐managed firms finds that founder management has no main effect on stock returns over a 3‐year holding period, but that firm size and firm age moderate the CEO founder status–firm performance relationship. Copyright

CEO Overconfidence and International Merger and Acquisition Activity

This study examines the role that chief executive officer (CEO) overconfidence plays in an explanation of international mergers and acquisitions during the period 2000–2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we find that CEO overconfidence is related to a number of critical aspects of international merger activity. Overconfidence helps to explain the number of offers made by a CEO, the frequencies of nondiversifying and diversifying acquisitions, and the use of cash to finance a merger deal. Although overconfidence is an international phenomenon, it is most extensively observed in individuals heading firms headquartered in Christian countries that encourage individualism while de-emphasizing long-term orientation in their national cultures.

An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers

This study examines the determinants of mutual fund mergers and their subsequent wealth impact on shareholders of target and acquiring funds. Results indicate significant improvements in postmerger performance and a reduction in expense ratios for target fund shareholders. In contrast, acquiring fund shareholders experience a significant deterioration in postmerger performance. The net asset flows continue to remain negative for the combined fund in the year following the merger. The likelihood of a fund merger is inversely related to fund size for both within- and across-family mutual fund mergers. However, poor past performance is a significant determinant for only within-family mergers. Copyright The American Finance Association 2002.

The Valuation Impacts of Specially Designated Dividends

This paper examines the valuation impacts of specially designated dividends (SDDs) by analyzing the behavior of stock and bond prices on dates surrounding their announcements. The evidence presented here suggests that SDDs are considered positive signals by the market, with (most of) the gains associated with their announcements accruing to stockholders. In addition, we present some evidence that the gain to stockholders is negatively related to the frequency of SDD announcements.

An Experimental Study of Circuit Breakers: The Effects of Mandated Market Closures and Temporary Halts on Market Behavior

This paper analyzes the effect of circuit breakers on price behavior, trading volume, and profit-making ability in a market setting. We conduct nine experimental asset markets to compare behavior across three regulatory regimes: market closure, temporary halt, and no interruption. The presence of a circuit breaker rule does not affect the magnitude of the absolute deviation in price from fundamental value or trading profit. The primary driver of behavior is information asymmetry in the market. By comparison, trading activity is significantly affected by the presence of a circuit breaker. Mandated market closures cause market participants to advance trades.

The post-listing puzzle: evidence from Tokyo Stock Exchange listing

Abstract In this paper, we examine the post-listing return and trading volume behavior of 292 stocks that listed on the Tokyo Stock Exchange during the period 1975–1989. Though the abnormal returns for the full sample are significantly positive, these returns are primarily driven by the IPOs, which do not begin trading immediately. The post-listing returns pattern for the non-IPO firms that list in the first section is negative and similar to those reported for stocks that list on the NYSE. The post-listing abnormal returns for those stocks that list in the second section are negative but insignificant and differ from significant negative abnormal returns for stocks that list on the American Stock Exchange. We explore the role trading volume plays in explaining the post-listing return behavior. We find some support for the argument that a lack of trading interest provides a partial explanation as to why the negative post-listing returns persists for non-IPOs. The post-listing anomaly for non-IPOs seems to be an international phenomenon.

Do Country Specific Bankruptcy Codes Determine Long-term Financial Performance? The Case of Metallgesellschaft AG and Columbia Gas System

In this paper, we examine the impact of financial distress, the bankruptcy code, and related procedures on the long-term performance of two companies engaged in similar businesses across two countries. Both the companies were driven into bankruptcy as a result of unanticipated changes in energy prices. Though the resolution of bankruptcy of the US firm took a longer time, the post-reorganization performance of the firm has been excellent. In contrast, the post-reorganization performance of the German firm, which emerged out of bankruptcy in 2 weeks, has been poor. These results are consistent with the view that one of the important determinants of post-bankruptcy performance of a firm is more likely to be the underlying economic fundamentals rather than the country specific bankruptcy code through which the firm reorganizes.

Circuit Breakers with Uncertainty about the Presence of Informed Agents: I Know What You Know . . . I Think

This study conducts experimental asset markets to examine the effects of circuit breaker rules on market behavior when agents are uncertain about the presence of private information. Our results unequivocally indicate that circuit breakers fail to temper unwarranted price movements in periods without private information. Agents appear to mistakenly infer that others possess private information, causing price to move away from fundamental value. Allocative efficiencies in our markets are high across all regimes. Circuit breakers perform no useful function in our experimental asset markets.

The ex-date impact of rights offerings. The evidence from firms listed on the Tokyo stock exchange

Abstract This paper examines the behavior of stock price and trading volume around the ex-dates of rights offerings by firms listed on the Tokyo Stock Exchange. Based on a sample of 248 rights offerings over the time period from 1975 to 1989, we document a significant abnormal stock return of 7.10 percent on the ex-date of an offering. We also find significant increases in trading activity on the ex-date, and the five days leading up to the ex-date, with these increases being related to the ex-date abnormal return. In addition, our investigation reveals an increase in stock volatility after the ex-date, with the median value of this increase being 18 percent. Our results also indicate that a part of this volatility increase can be explained by changes in bid-ask spreads around the ex-date.