Ranjan D'Mello
Wayne State University
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Featured researches published by Ranjan D'Mello.
Financial Management | 2000
Ranjan D'Mello; Stephen P. Ferris
Myers and Majluf (1984) argue that informational asymmetry between managers and investors can explain the negative stock returns around the announcement of new equity. Using analyst following and consensus as proxies for information asymmetry, we observe that announcement period returns are significantly more negative for firms followed by fewer analysts and whose forecasts exhibit less consensus. Our findings hold after controlling for firm size and growth opportunities. Finally, we find evidence suggesting that analyst activity also influences firms’ long-term performance. We conclude that the information role of security analysts partially explains the negative stock returns surrounding the announcement of new equity.
Journal of Financial Markets | 2003
Ranjan D'Mello; Stephen P. Ferris; Chuan-Yang Hwang
Abstract In this paper, we use intra-day data for all stocks listed on the ISSM and provide new and direct evidence consistent with the tax-loss selling hypothesis. We find that (a) there is abnormal selling pressure prior to the year-end for stocks that have experienced large capital losses in the current and prior years (b) investors delay realizing capital gain by postponing the sale of capital gain stocks until after the new year (c) there is a significant decrease in the average trade size for stocks with large capital losses before the year-end and for stocks with capital gains in the new year, which suggests that individuals, rather than institutional investors, are the major sellers around the year-end (d) the tax-loss selling hypothesis, and not firm size or share price, is the fundamental explanation for abnormal January returns. Further, small or low share priced firms with capital gains do not experience abnormal returns in January. However, conditional on capital losses, small or low share priced firms magnify the turn-of-the-year effect (e) On average, the increase in selling activity adversely affects market liquidity by increasing bid-ask spreads and reducing depths. (f) The tax-loss selling pressure not only causes the price to be at the bid at the year-end, it also temporarily depresses the equilibrium price indicating the short run demand curve is not perfectly elastic (g) the year-end buying activity suggests that large investors buy capital loss stocks prior to the year-end to take advantage of the temporarily depressed price and capital gain stocks after the new year to reinvest the proceeds of the tax-loss selling.
Financial Management | 2003
Ranjan D'Mello; Oranee Tawatnuntachai; Devrim Yaman
We investigate the relation between announcement period returns and the sequence of seasoned equity offerings (SEOs) for industrial, financial, and utility firms making multiple offerings. For industrial firms, there is a monotonically positive relation between the returns and the sequence of issues. Further, the stock price reactions to the fourth and subsequent issues by industrial firms are insignificant. For firms that conduct at least two SEOs, there is no difference in returns between industrial firms and utilities or financial institutions. The lower negative returns for later announcements by industrial firms can be explained by reduced adverse selection costs.
Journal of Financial Research | 2002
Oranee Tawatnuntachai; Ranjan D'Mello
This paper examines whether favorable information conveyed by stock split announcements transfers to non-splitting firms within the same industry. We find that there exists intra-industry reaction; shareholders of non-splitting firms experience significant positive abnormal returns during the stock split announcement period of their industry counterparts. In addition, we find that industry-wide (level of concentration) and firm-specific characteristics (degree of similarity with the splitting firm, level of asymmetric information, and mispricing) are important determinants in explaining the impact of the announcements on non-splitting firms. We further document an increase in earnings subsequent to the announcements which is associated to the stock price reactions. However, we find little evidence that there is a decline in earnings volatility and find no significant relation between change in earnings volatility and announcement period returns.
The Financial Review | 2003
Ranjan D'Mello; Oranee Tawatnuntachai; Devrim Yaman
This paper examines the motivations of firms that conduct seasoned equity offerings (SEOs) after splitting stocks. We find no difference in equity announcement and issue period returns between these firms and other equity-issuing firms, suggesting that firms do not split stocks to reveal information and reduce adverse selection costs at the subsequent SEO. However, because investors react positively to split announcements, firms that issue equity after splitting stocks sell new shares at a higher price and raise more funds. We also find that firms split stocks to make the subsequent SEO more marketable to individual investors who are attracted to low-priced shares. Copyright 2003 by the Eastern Finance Association.
Archive | 2011
Ranjan D'Mello
We investigate the impact of the creation of a new incentive structure for CEOs resulting from firms initiating equity-based compensation (EBC) as a means of paying top executives on firm policy decisions. Contrasting firm stock and operating performance in the period the CEO is compensated with EBC (EBC period) and the period when EBC is not a component of the executive’s pay (No EBC period) leads us to conclude that awarding stock options and restricted shares to executives is not associated with higher firm value. However, firms have higher unsystematic and total risk levels in the EBC period suggesting that awarding equity-based compensation to CEOs influences their risk-taking behavior. While there is no change in R&D expenses and cash ratios there is a decrease in capital expenditures in the EBC period, which is consistent with reduced overinvestment agency costs. Finally, leverage and dividend payout ratios are similar in EBC and No EBC periods implying that EBC does not impact a firm’s financing policy.
Journal of Finance | 2000
Ranjan D'Mello; Pervin K. Shroff
Journal of Corporate Finance | 2011
Ilhan Demiralp; Ranjan D'Mello; Frederik P. Schlingemann; Venkat Subramaniam
Journal of Financial Intermediation | 2009
Sudip Datta; Ranjan D'Mello; Mai Iskandar-Datta
Review of Financial Economics | 2008
Ranjan D'Mello; Joseph B. Farhat