Robert J. Hendershott

Winners and Losers as Financial Service Providers Converge: Evidence from the Financial Modernization Act of 1999

The Financial Modernization Act of 1999 dramatically increased insurers’ and investment banks’ authority to provide an array of financial services and allowed commercial banks to offer investment banking and insurance services. In this paper we examine the market response to this legislation. We find a strong positive response among insurance companies and investment banks, and no significant response among commercial banks. Larger institutions in all three financial sectors earn higher abnormal returns. Additionally, better performing banks earn higher abnormal returns. Our results suggest that allowing financial convergence can add value through synergies and that large players are needed to exploit the scope economies.

Net value: wealth creation (and destruction) during the internet boom

Abstract During the internet bubble, dot-com stocks rose by a factor of 35, creating what we now know were massively distorted price signals. This paper looks at net value creation in a sample of 441 venture-backed dot-coms that received over US

Optimal Effort Allocation by U.S. Senators: The Role of Constituency Size

21 billion from private and public equity investors. As of the end of 2001, this US

Outside director‐shareholder agency conflicts: evidence from bank consolidation

21 billion corresponded to an estimated US

Hype and Internet Stocks

39 billion of enterprise value, giving an annualized return-on-equity capital invested of 19%. These results suggest that, despite the distorted price signals and contrary to popular perception, wealth was created during the dot-com investment boom.

The Gains from Takeover Deregulation: Evidence from the End of Interstate Banking Restrictions

Legislators in a representative democracy are modeled as being able to allocate a fixed amount of effort between two objectives: national policymaking and local benefit-seeking. The model predicts that the effort allocated to local benefit-seeking should be a negative function of the population size of a legislators constituency. We empirically test and confirm this prediction by examining the manner in which United States senators allocate their personal staff between home state and Washington D.C. offices.

The federal deposit insurance fund that didn't put a bite on U.S. taxpayers

Purpose – Takeovers create a potential conflict of interest between target shareholders and directors. While mergers generally create value for the target shareholders, their directors will typically lose their board seats and likely face a financial loss or loss of prestige. The purpose of this paper is to examine evidence to support or refute that directors may act in their own best interests at the expense of shareholders.Design/methodology/approach – The authors reason that if directors act in their own best interests, then acquiring firms will seek targets with older board members who are closer to director retirement and are therefore less reluctant to give up their board seats. The paper uses data of 528 banks between 1999 and 2004 to estimate logistic regressions controlling for variables relevant to takeover probability. In the hypotheses, the authors test for the significance of the average director age on a board.Findings – The paper finds a highly positive significant relation between the aver...

Corporate governance and recent consolidation in the banking industry

Between March 30 and April 14 of 1999, the stock price of a small Internet-only thrift, Netbank, jumped from

Do Firms Use Dividends to Signal Large Future Cash Flows

63 per share to a peak of

The Mortgage Finance Bubble: Causes and Corrections

249 (from a low of under