Dr. Xueping WU, Dr. Yaxuan QI, Dr. Shan
ZHAO and Dr. Qianqian HUANG
Year 2021-22, Semester B
Monday 19:00-21:50
Class Room: 7-207 LAU (AC3)
This course covers 13 topics
co-taught by four finance faculty. These topics are related to corporate
finance and governance. In a perfect market without market imperfections (or
frictions), corporate financial policies (the right-hand side of the balance
sheet) have no valuation effect—firm value is fully determined by assets in
place plus the investment opportunities (the left-hand side of the balance
sheet, measured in market value). Conversely, if market imperfections such as
agency conflicts and asymmetric information arise to distort investments, firm financial
decisions do matter. As a result, managers have to choose optimally financial decisions
to mitigate market imperfections faced by their firms. If anybody ever suggests
you an optimal financial policy, the first thing you should ask is “what is the
specific market imperfection here?”
Different types of firm may face
different specifications of market imperfection and hence may take distinct financial
policies as optimal responses accordingly to given types of business on the
left-hand side of the balance sheet. This is close to a neoclassic view in
which real investment is essential and dominates over everything else. However,
many researchers still believe that managers can steer financial policy to
affect real investment. In macroeconomics, a so-called financing-channel
determination of investment has become an important view. We hope this course
will broad you views before you get down to your research work. Research is a
learning by doing process and we hope your high quality empirical research in finance
starts with the course.
Dr Wu (webpage: http://personal.cityu.edu.hk/~efxpwu/)
will focus on specifications of market imperfections and spell out the relationships
between firm valuations and financial decisions under various market
imperfections. We will deepen our discussion on major corporate financial
issues such as capital structure and dividend policies.
Dr. Qi will look at debt financing, law and finance,
and financial institution. She will first cover basic theories
and survey papers to understand fundamental issues and important findings in
this area. She will also study selected
papers exploring agency cost of debt, underinvestment and overinvestment, bankruptcy,
political risk and regulation.
Dr. Zhao will focus on
corporate governance issues. He will first introduce the basic framework of
corporate governance. Then he will cover main components of corporate
governance: ownership structure, the market for control, executive compensation,
boards of directors, and shareholder activism.
Dr. Huang will focus on
Initial Public Offerings (IPO) and Mergers and Acquisitions (M&A). IPOs and
M&As are among the most important financing and investment decisions that
firms undertake. We will examine the determinants of firms’ decisions to go
public or merge, pricing of IPOs, and the short and long-run stock performance
of the newly public and acquiring firms.
Grade: 50% Assignments; 50% Final Essay
Course materiel: Class notes and parts from textbooks:
(1) Brealey,
Richard A., Stewart C. Myers, and
Franklin Allen (BMA), “Principles of Corporate Finance”, 8/e or later editions, McGraw-Hill
(2) Reading lists of journal
articles under various topics
Assignment (to be explained in class):
There will be one assignment
that requires hands-on exercises to deal with research data and designs. The
purpose is for the students to get familiar with the databases that will be
eventually useful and likely processed in an effective way in the later
dissertation development.
Course Outline
Topic 0: (Each Professor accordingly) Literature
Search Method
The pedagogical arrangement
on delivering the topic on literature search will be through hands-on practice
during the whole semester.
Ø Search e-resource at Library
of CityU of HK
Ø Google Search with
known/partly known author/paper title/keywords
Ø Tracking the citations:
e.g., Google Scholar
Ø Advanced Search at FEN and
other related sources
Ø Search PhD students’
research topics from top schools
Ø Get familiar with databases
commonly used for finance and accounting research
Topic 1: (Dr. Wu) Firm Valuation
and Capital Structure (BMA Ch.5, 6.,7, 18,19,20)—Home
Reading of Class Notes
·
Basic Economic Issues in Firm Valuation in a Neoclassic Framework
·
Firm Valuation Framework
·
Separation of Firm Valuation from Financial Policies
·
Capital or Financial Structure with and without Taxes (Proof of MM I
& II)
·
Cost of Equity and Cost of Capital (WACC)
·
Determination of Debt/Equity Ratio: A preview
Topic 2: (Dr. Wu) Payout
Policy (BMA Ch17)
·
Tax Effects
·
Asymmetric Information: Signaling and Adverse Selection Models
·
Incomplete Contracts: Agency Models
Topic 3: (Dr. Wu) Seasoned
Equity Offerings (SEOs) (BMA Ch15, 16)
·
Floatation Methods of SEOs
·
Floatation Costs and Rights Offer Puzzle
·
Announcement Effects of SEOs: Empirical
·
SEO Announcement Effects: Hypotheses and Theories
·
Long Term Performance After SEO
Topic 4: (Dr. Wu) On the Persistence in Corporate
Finance
·
The Generalized Myers and Majluf Framework and a Growth-type-aligned
Pattern for Financing
·
A Growth Type Explanation for Persistence in Capital Structure
·
A Growth Type Explanation for Persistence in Dividend Policies
·
A Growth Type Explanation for Investment-Cash Flow Sensitivities
·
A Firm Growth Type Compatibility Framework for Corporate Finance
Readings:
(Note: a classic paper “#”, a hot paper “*”, a review paper “@”)
Firm
Valuation, Investment and Financing Decisions
1.
*Fama, Eugence F., and Kenneth R. French, 1998, Taxes, financing
decisions, and firm value, Journal of
Finance 53, 819-843.
2.
@Miller, Merton,
1988, The Modigliani Miller propositions after thirty years, Journal of Economic Perspectives 2, No
4, 99-120.
3.
#Miller, Merton,
and Franco Modigliani, 1961, Dividend policy, growth, and the valuation of
shares, Journal of Business 34, 411-433.
4.
#Modigliani, Franco, and Merton Miller, 1958, The cost of capital, corporation
finance, and the theory of investment, American
Economic Review 48, 261-297.
5.
#Modigliani, Franco, and Merton Miller, 1963, Corporate income taxes
and the cost of capital: A correction, American
Economic Review 53, 433-443.
6.
Smith, C., R. Watts, 1992, the investment opportunity set and corporate
financing, dividend, and compensation policies, Journal of Financial Economics 32, 263-292.
7.
#Stein, Jeremy
C., 1996, Rational capital budgeting in an irrational world, Journal of Business 69, 429-455.
8.
*Stulz, R. 1990, Managerial discretion and optimal financing policies, Journal of Financial Economics 26, 3-27.
9.
Wu, Xueping and Lily L. Xu, 2005, The Value
Information of Financing Decisions and Corporate Governance during and after
the Japanese Deregulation, Journal of Business 78,
No. 1, 243-280.
10. @Zingales, Luigi, 2000, In search of new foundations, Journal
of Finance 55, 1623- 1653.
11. Rajan, Raghuram G., 2012, The corporation in finance, Journal of Finance 67, 1173-1217.
12. Wu, Xueping, and C.K. Au Yeung, 2014, Firm growth
uncertainty and the persistence of corporate investment and financial policies,
Working paper, City University of
Hong Kong
13. Wu, Xueping, and C.K. Au Yeung, 2015, The sensitivity
of investment to cash flow: An explanation based on the growth-type-aligned
financing hierarchy, Working paper,
City University of Hong Kong
Capital Structure
14. Alti, Aydogan, 2006, How persistent
is the impact of market timing on capital structure? Journal of Finance 61, No. 4, 1681-1710.
15. *Baker, M., and J. Wurgler,
2002, Market timing and capital structure, Journal
of Finance 57, 1-32.
16. *Fama, Eugene F., and Kenneth R. French, 2002, Testing
trade-off and pecking order predictions about dividends and debt, Review of Financial Studies 15, 1-33.
17. @Harris, Milton, and Artur Raviv, 1991, The theory of
capital structure, The Journal of Finance
46, 297-355.
18. *Lemmon, Michael, Michael Roberts, and Jaime Zender,
2008, Back to the beginning: Persistence and the cross-section of corporate
capital structure, Journal of Finance
63, 1575-1608.
19. #Myers, Steward C., 1977,
Determinants of corporate borrowing, Journal
of Financial Economics 5, 147-175
20. #Myers, Stewart C., 1984,
The capital structure puzzle, Journal of
Finance 39, 575-592
21. @Myers, Stewart C., 2003, Financing
of corporations, in George M. Constantinides, Milton Harris, and Rene M. Stulz,
eds.: Handbook of the economics of finance (Elsevier, North-Holland).
22. *Rajan, R. and L. Zingales, 1995,
What do we know about capital structure? Some evidence from international data,
Journal of Finance 50, 1421-1460.
23. Titman, Sheridan, and
Roberto Wessels, 1988, The determinants of capital structure choice, Journal of Finance 43, 1-19.
24. Kayhan, Ayla, and Sheridan
Titman, 2007, Firms' histories and their capital structures, Journal of Financial Economics 83, 1-32.
25. Chang, Xin, and Sudipto Dasgupta,
2009, Target Behavior and Financing: How Conclusive is the Evidence? The Journal of Finance 64, 1767-1796.
26. Wu, Xueping, and Chau Kin Au
Yeung, 2012, Firm growth type and capital structure persistence, Journal of Banking and Finance 36,
No.12, 3427-43.
Corporate Payout Policies
27. @Allen, Franklin, and Roni Michaely, 2003, Payout
policy, in George Constantinides, Milton Harris, and Rene Stulz, eds.: North-Holland Handbooks of Economics of
Finance (Elsevier,
28. DeAngelo, Harry, Linda DeAngelo, and Douglas J.
Skinner, 2004, Are dividends disappearing? Dividend concentration and the
consolidation of earnings, Journal of
Financial Economics 72, 425-456.
29. *DeAngelo, Harry, Linda DeAngelo, and Rene M. Stulz,
2006, Dividend policy and the earned/contributed capital mix: A test of the
life-cycle theory, Journal of Financial
Economics 81, 227-254.
30. *Fama, Eugene F., and Kenneth R. French, 2001,
Disappearing dividends: Changing firm characteristics or lower propensity to
pay? Journal of Financial Economics 60, 3-44.
31. Grullon, Gustavo, Roni Michaely, and Bhaskaran
Swaminathan, 2002, Are dividend changes a sign of firm maturity, Journal of Business 35, 387-424.
32. Ikenberry, David, Josef
Lakonishok, and Theo Vermaelen, 1995, Market underreaction to open market share
repurchases, Journal of Financial Economics
39, No. 2&3, 181-208.
33. Jagannathan, Murali, Clifford Stephens, and Michael
Weisbach, 2000, Financial flexibility and the choice between dividends and stock
repurchases, Journal of Financial
Economics 57, No. 3, 355-384.
34. #Jensen, Michael C., 1986, Agency costs of free cash
flow, corporate finance, and takeovers, The
American Economic Review 76, 323-329.
35. *La Porta, R., F.
Lopez-de-silanes, A. Shleifer, and R. Vishny, 2000, Agency problem and dividend
policies around the world, Journal of
Finance 55, 1-33.
36. Lie, Erik, 2000, Excess funds and agency problems: An
empirical study of incremental cash disbursements, Review of Financial Studies 13, 219-248.
37. Michaely, R., R.H. Thaler
and K. Womack, 1995, Price reactions to dividend initiations and omissions:
Overreaction or drift? Journal of Finance
50, 573-608.
38. Hoberg, Gerard, and
Nagpurnanand R. Prabhala, 2009, Disappearing Dividends, Catering, and Risk, Review of Financial Studies 22 (1),
79-116.
39. Wu, Xueping, and C.K. Au Yeung,
2012, A growth type explanation for persistence in retained earnings and the decision
to pay dividends, Working paper, City
University of Hong Kong
Seasoned Equity Offering
40. *Bayless, M., Chaplinsky, S., 1991, Expectations of
security type and the information content of debt and equity offers, Journal of Financial Intermediation 1,
195-214.
41. Denis, D.J., 1994, Investment opportunities and the
market reaction to equity offerings, Journal of Financial and Quantitative
Analysis 29, 159-177.
42. @Eckbo, Espen B., Ronald W. Masulis, and Oyvind Norli,
2007, Security Offerings, in Espen Eckbo ed.: Handbook of Corporate
Finance: Empirical Corporate Finance, Volume 1, Elsevier/North-Holland
Handbook of Finance Series, Ch. 6, 233-373.
43. Eckbo, B.E., Masulis, R.W., 1992, Adverse selection
and the rights offer paradox, Journal of
Financial Economics 32, 293-332.
44. *Jung, K., Y. Kim, and R. Stulz, 1996, Timing,
investment opportunities, managerial discretion, and the security issue decision, Journal of Financial Economics 42, 159-85.
45. *Korajczyk, R.A., Lucas,
D.J., McDonald, R.L., 1992, Equity issues with time-varying asymmetric
information, Journal of Financial and
Quantitative Analysis 27, 397-417.
46. Kothare, M., 1997, The
effects of equity issues on ownership structure and stock liquidity: a
comparison of rights and public offering. Journal
of Financial Economics 43, 131-148
47. *Wruck, K., 1989, Equity
ownership concentration and firm value: evidence from private equity
financings, Journal of Financial
Economics 23, 3-28.
48.
Wu, Xueping, Zheng Wang, and Jun Yao, 2005, Understanding the Positive
Announcement Effects of the Private Equity Placements: New Insights from Hong
Kong Data, Review of Finance (The official
Journal of the European Finance Association), Vol. 9 (September), 385-414.
49. Fama, Eugene F., and Kenneth R. French, 2005,
Financing decisions: Who issues stock? Journal
of Financial Economics 76, 549-582.
50. Hertzel, Michael, Mark Huson, and Robert Parrino,
2012, Public market staging: The timing of capital infusions in newly public
firms, Journal of Financial Economics
106, 72-90.
51. #Akerlof, G.A., 1970, The
market for “lemons”: Quality and the market mechanism, Quarterly Journal of Economics 84, 488-500.
52. @Daniel, K., Titman, S.,
1995, Financing investment under asymmetric information, Handbooks in
Operational Research and Management Science, Jarrow, R. eds. 9, 721-766.
53. #John, Kose, and Joseph Williams, 1985, Dividends,
dilution and taxes, Journal of Finance
40, 1053-1070.
54. #Miller, M., and K. Rock,
1985, Dividend policy under asymmetric information, Journal of Finance 40, 1031-52.
55. #Myers, S.C., Majluf, N.,
1984, Corporate financing and investment decisions when firms have information
that investors do not have, Journal of
Financial Economics 13, 187-221.
56. #Spence, A.M., 1973, Job
market signaling, Quarterly Journal of
Economics 87, 355-79.
57. *Wu, Xueping, and Zheng
Wang, 2005, Equity
Financing in A Myers-Majluf Framework with Private Benefits of Control ,
Journal of
Corporate Finance , Vol. 11, No. 5 (October), 915-945.
58. #Stiglitz, J., and A. Weiss,
1981, Credit rationing in markets with imperfect information, American Economic Review 71, 393-410.
Topic 5 (Dr. QI) Agency cost of debt and debt contract
·
Agency Theory and
Bondholder-shareholder conflict
·
Debt covenant,
creditor control rights and debt renegotiation
·
Banking-firm
relationship & delegated monitoring
·
Debt structure
Readings: (important papers start
with *, review papers start with @)
Classical and theoretical paper
1.
*Jensen, M., and W. Meckling, 1976, Theory of
the firm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics 3,
305-360.
2.
*Myers, S., 1977. The determinants of Corporate
Borrowing, Journal of Financial Economics,
147-175.
3.
*Bernanke, B., and Gertler, M., 1989. Agency
costs, net worth, and business fluctuations. American Economic Review 79, 14-31.
A. Debt
covenants paper
4.
*Smith, Clifford W., and Warner, Jerold B.,
1979. On financial contracting: An analysis of bond covenants. Journal of Financial Economics 7,
117-161.
5.
DeAngeloa, Harry,
DeAngeloa, Linda, and Wruck, Karen H., 2002. Asset liquidity, debt covenants,
and managerial discretion in financial distress: the collapse of L.A. Gear. Journal of Financial Economics 64, 3-34.
6.
*Billett,
Matthew, King, Tao-Hsien Dolly, and Mauer, David. 2007. Growth Opportunities
and the Choice of Leverage, Debt Maturity, and Covenants. Journal of Finance 62, 697-730.
7.
Chava, Sudheer,
Kumar, Praveen, and Warga, Arthur. 2010, Managerial Agency and Bond Covenants. Review of Financial Studies 23,
1120-1148.
8.
Muffin, Justin.
2012. The supply-side determinants of loan contract strictness. Journal of Finance 67, 1565-1601.
B.
Creditor rights control
9.
*Chava, Sudheer,
and Roberts, Michael R., 2008. How does financing impact investment? The role
of debt covenants. Journal of Finance
63, 2085-2121.
10. Roberts, Michael R., and Sufi, Amir. 2009a. Control
Rights and Capital Structure: An Empirical Investigation, Journal of Finance 64, 1657-1695.
11. Nini, G., D. Smith, and A. Sufi, 2009, Creditor
Control Rights and Firm Investment Policy, Journal
of Financial Economics 92, 400-420.
12. Demiroglu, Cem, and James, Christopher M., 2010. The
Information content of bank loan covenants. Review
of Financial Studies 23, 3700-3737.
13. Feldhutter, P., Edith Hotchkiss, and Oguzhan Karakas,
2016. The value of creditor control in corporate bonds. Journal of Financial
Economics, 121, 1-27.
C. Debt
maturity
14.
*Barclay, M. J. & Smith, C. W. 1995. The
maturity structure of corporate-debt. Journal
of Finance, 50, 609-631
15.
*Diamond, D. W. 1991. Debt maturity structure
and liquidity risk. Quarterly Journal of
Economics 106(3), 709-737.
16.
Johnson, S. A. 2003. Debt maturity and the
effects of growth opportunities and liquidity risk on leverage. Review of Financial Studies, 16(1),
209-236.
17.
*He, Zhiguo, and Wei Xiong, 2012. Rollover risk
and credit risk. Journal of Finance 67, 391-430.
18.
Saretto, Alessio, and Heather E. Tookes, 2013.
Corporate leverage, debt maturity, and credit supply: the role of credit
default swaps. Review of Financial
Studies 26, 1190-1247.
19.
Diamond, D. W., and Zhiguo He, 2014. A Theory
of debt maturity: the long and short of debt overhang. Journal of Finance 69, 719-762.
20.
Badoer, D. C., and James, C. M., 2016. The
determinants of long-term corporate debt issuances. Journal of Finance 71, 457-472
Topic 6 (Dr. QI) debt contract and financial
institutions (cont.)
A. Bank
relationships and delegated monitoring
21. @Boot, A. W. A. 2000. Relationship banking: what do we
know? Journal of Financial Intermediation
9, 7-25.
22. *Diamond,
D., 1984. Financial Intermediation and Delegated
Monitoring, Review of
Economic Studies 51, 393-414.
23. *Rajan, R,
1992. Insiders and Outsiders: The Choice
between Relationship and Arm's
Length Debt, Journal of Finance 47, 1367-1400.
24. *Petersen, M. and R. Rajan, 1994. The benefits of Lending Relationships:
Evidence from Small Business Data, Journal
of Finance 49, 3-37.
25. Santos, J. A., and A. Winton, 2008. Bank
loans, bonds, and information monopolies across the business cycles. Journal of Finance 63, 1315-359.
26. Hale, G. and J. Santos, 2009. Do banks price their information monopoly? Journal of Financial Economics 93,
185-206.
27. Drucker, Steven, Puri, Manju, 2009. On loan sales,
loan contracting, and lending relationships. Review of Financial Studies 22, 2835-2872.
28. Schenone, C., 2010. Lending relationships and
information rents: do banks exploit their information advantage, Review of Financial Studies 23,
1149-1199.
29. Bharath, Sreedhar T., Sandeep Dahiya,
Anthony Saunders, and Anand Srinivasan. 2011. Lending relationship and loan
contract terms. Review of Financial
Studies 24, 1141-1203.
30. Wang, Yihui, and Xia, Han, 2014. Do Lenders Still
Monitor When They Can Securitize Loans? Review
of Financial Studies 27, 2354-2391.
31. Karolyi, S. A., 2017. Personal Lending
Relationships. Journal of Finance
73, 5-49.
B. Debt
renegotiation
32. Chen, Kevin C. W. and Wei, K. C. John. 1993.
Creditors' Decisions to Waive Violations of Accounting-Based Debt Covenants. The Accounting Review 68, 218-232.
33. *Roberts, Michael, R., and Amir Sufi. 2009b.
Renegotiation of financial contacts: evidence from private credit agreement. Journal of Financial Economics 93,
159-184.
34. Denis, David, and Wang, Jing. 2014. Debt covenant
renegotiations and creditor control right. Journal
of Financial Economics113, 348–367.
35. Roberts, M. R., 2015. The role of dynamic
renegotiation and asymmetric information in financial contracting. Journal of Financial Economics 116,
61-81.
C. Cross monitoring
36. Booth, James R., 1992. Contract costs, bank loans, and
the cross-monitoring hypothesis. Journal
of Financial Economics 31, 25-41.
37. Datta, Sudip, Iskandar-Datta, Mai, and Patel, Ajay,
1999. Bank monitoring and the pricing of corporate public debt. Journal of Financial Economics 51, 435-449.
38. Beatty, A., Scott Liao, and Joseph Weber,
2012. Evidence on the determinants and economic consequences of delegated
monitoring. Journal of Accounting and
Economics 53, 555-576.
39. Houston, Joel F., Chen Lin, and Junbo Wang. 2014. Does
bank monitoring matter to bondholders. HKIMR working paper.
40. Li, Bo, Purda, Lynnette, and Wang Wei, 2015. Senior
lender control rights and cost of debt. Working paper, Tsinghua University.
D. Debt structure
41. @Kale, Jayant R., and Meneghetti, Costanaza. 2011. The
choice between public and private debt: A survey. IIMB Management Review 23, 5-14.
42. Houston, J. and
C. James, 1996. Bank information monopolies and the mix of public and private
debt claims, Journal of Finance 51,
1863-89.
43. Denis, D,
Mihov V, 2003. The choice among bank debt, non-bank private debt, and public
debt: evidence from new corporate borrowings. Journal of Financial Economics 70, 3-28. .
44. Lin, C, Ma, Y, Malatesta, P, Xuan Y, 2013. Corporate
ownership structure and the choice between bank debt and public debt. Journal of Financial Economics 109,
517-534.
45. *Rauh, Joshua D., and Amir Sufi. 2010. Capital
structure and debt structure. Review of
Financial Studies 23, 4242-4280.
46. Colla, Paolo, Filippo Ippolito, and Kai Li. 2013. Debt
specialization. Journal of Finance 68,
2117-2141.
47. Ivashina, V., B. Iverson, and D. Smith, 2016. The
ownership and trading of debt claims in Chapter 11 restructurings. Journal of Financial Economics 119,
316-335.
48. Lou, Yun, and Clemens A. Otto. 2015. Debt
heterogeneity and covenants. Working paper. HEC Paris.
49. Valta, P., 2016. Strategic default, debt structure,
and stock returns. Journal of Financial
and Quantitative Analysis 51, 197-229
Topic 7: (Dr. QI) Law and finance
·
Country-level factors: legal institutions &
political connection
·
Market for corporate control
50.
@North, Douglass C. 1991. Institutions. Journal of Economic Perspectives 5,
97-112.
51.
@Gibbons, Robert. 1998. Incentives in
Organizations. Journal of Economic
Perspectives, 12(4): 115-132.
52.
@Malmendier, Ulrike. 2009. “Law and Finance” at
the Origin. Journal of Economic
Literature, 47(4): 1076-1108.
53.
Coase, Ronald, 1960. The problem of social
cost. Journal of Law and Economics 3,
1-44.
A. Law and finance
54. *La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishiny, 1998, Law
and Finance, Journal of Political Economy
106, 1113-1155.
55. Spamann, Holger. 2010. The “antidirector rights index” revisited. Review of Financial Studies 23, 467-486.
56. Guiso, Luigi, Sapienza, Paola, and Zingales, Luigi.
2002. Does local financial development matter? Quarterly Journal of Economics 119, 929-969.
57. *Acharya, V., Amihud, Y., and Litov, L., 2011.
Creditor rights and corporate risk-taking. Journal
of Financial Economics 102, 150-166.
58. Qi, Y., Roth, L., and Wald, J.K., 2016, Creditor
protection laws, debt financing, and corporate investment over the business
cycles. Journal of International Business
Studies, forthcoming.
59. Campello, M., and M. Larrain. 2016. Enlarging the
contracting space: collateral menus, access to credit, and economic activity. Review of Financial Studies 29, 349-383.
B. Political Risk
60. Qi, Y., Roth, L., and Wald, J.K., 2010. Political
rights and the cost of debt. Journal of
Financial Economics 95, 202-226.
61. Julio, B, and Y. Yook. 2012. Political uncertainty and
corporate investment cycles. Journal of
Finance 67, 44-83.
62. Pastor, L, and P. Veronesi. 2012. Uncertainty about
government policy and stock prices. Journal
of Finance 67, 1219-1264.
63. *Pastor, L, and P. Veronesi. 2013. Political
uncertainty and risk premia. Journal of
Financial Economics 110, 520-545.
Topic 8:
(Dr. Zhao)
Corporate Governance: Ownership structure and the market
for control
Sometimes
I only list the latest papers and, if you want to read the classical papers,
you can find them easily by reading those latest paper.
Readings: (important papers start with *, review papers
start with @)
A. Ownership structure
B. The market for control
Topic 9: (Dr. Zhao)
Corporate Governance: Boards of directors and executive compensation
A. Boards of director
B. Executive compensation
26. @Frydman, C., Jenter, D., 2010. CEO compensation.
Annual Rev. Financ. Econ. 2 (1),75.102
27. @Edmans, Alex, Xavier Gabaix, and Dirk Jenter, 2017, Executive compensation: A survey of theory and evidence, Handbook of the Economics of Corporate Governance, Hermalin, B.E., Weisbach, M.S. (Eds.), Elsevier, Amsterdam,
Topic 10: (Dr. Zhao) Corporate Governance: Shareholder Activism
31. @Gillan, Stuart L and Laura T. Starks, 2007, The
Evolution of Shareholder Activism in the United States, Journal of Applied
Corporate Finance • Volume 19 Number
32. @Denes, Jonathan M. Karpoff and Victoria B.
McWilliams. Thirty Years of Shareholder Activism: A Survey of Empirical
Research, Journal of Corporate Finance, 2017, 44, 405-424
33. Ferris, Fabrizio, 2012, Low-Cost’ Shareholder
Activism: A Review of the Evidence
34. @Yermack, D., 2010, “Shareholder Voting and
Corporate Governance,” Annual Review of Financial Economics 2, 103-125.
35. @Brav, A., Jiang, W., and Kim, H., 2009, Hedge
fund activism: A review, Foundations and Trends in Finance 4, 185-246.
36. @ Brav, A., Jiang, W., and Li, R., 2009, Governance
by Persuasion: Hedge Fund Activism and the Market for Corporate Influence,
Working Paper, Columbia University
37. *Brav, Alon, Wei Jiang, Frank Partnoy, and
Randall Thomas, 2008, Hedge fund activism, corporate governance, and firm
performance, Journal of Finance 63, 1729–1775.
38. McCahery,
J., Sautner, Z., Starks, L.T., 2016. Behind the scenes: The corporate
governance preferences of institutional investors. J. Finance.
39. Dasgupta,Amil, Vyacheslav Fos and Zacharias
Sautner, 2020, Institutional Investors and Corporate Governance, Foundations and Trends in Finance
Topic
11: (Dr. Huang) Initial Public Offerings
·
Why
firms go public
·
IPO
market timing
·
Pricing
of IPOs
·
Long-run
IPO performance
·
Readings: (Note: a classic paper “#”, a
hot paper “*”, a review paper “@”)
1.
@Ritter,
Jay and Ivo Welch, 2002. A Review of IPO Activity, Pricing, and Allocations, Journal of Finance 57, 1795-1828.
2.
@Brau,
J. and S. Fawcett, 2006. IPOs: An analysis of theory and practice, Journal of Finance 61, 399-436.
3.
Pagano,
Marco, Fabio Panetta, and Luigi Zingales, 1998. Why do companies go public? An
empirical analysis, Journal of Finance
53, 27-64.
4.
Zingales,
Luigi, 1995. Insider ownership and the decision to go public, Review of Economic Studies 62, 425–448.
5.
Celikyurt, Ugur, Merih Sevilir, and Anil Shivdasani, 2010. Going public to acquire? The acquisition motive in IPOs, Journal of
Financial Economics 96, 345-363.
6.
Kim,
Woojin., and Michael Weisbach, 2008. Motivations for public equity offers: An
international perspective, Journal of Financial
Economics 87, 281–307
7.
Aydogan
Alti and Johan Sulaeman, 2012. When do high stock returns trigger equity
issues? Journal of Financial Economics
103, 61-87.
8.
*Loughran,
Tim, and Jay R. Ritter, 1995. The new issues puzzle, Journal of Finance 50, 23-51.
9. Teoh, S. H., I. Welch, and T. J. Wong, 1998. Earnings management and the long-run market performance of initial public offerings, Journal of Finance 53, 1935-1974.
10. Schultz,
Paul, 2003. Pseudo market timing and the long-run underperformance of
IPOs, Journal of Finance 58,
483-518.
11. *Brav, Alon, Chris Geczy, and Paul
Gompers, 2000. Is the abnormal return following equity issuance anomalous? Journal of Financial Economics 56,
209-249.
12. #Rock, Kevin, 1986., Why new issues are
underpriced, Journal of Financial
Economics 15, 187-212
13. Allen, Franklin, and Gary Faulhaber, 1989.
Signaling by underpricing in the IPO market, Journal of Financial Economics 23, 303-323.
14. Cliff, M., and Denis, D. 2004. Do initial
public offering firms purchase analyst coverage with underpricing. Journal
of Finance 59, 2871-2901.
15. #Benveniste, Lawrence M. and Paul A.
Spindt. 1989. How investment bankers determine the offer price and allocation
of new issues, Journal of Financial
Economics 24, 343-361.
16. Loughran, Tim, and Jay R. Ritter, 2002. Why
don't Issuers get upset about leaving money on the table in IPOs? Review of Financial Studies 15, 413-443.
17. Purnanandam, Amiyatosh and Bhaskaran
Swaminathan, 2004. Are IPOs Really Underpriced?, Review of Financial Studies 17, 811-848.
18. Lowry, Michelle and G. William Schwert,
2004. Is the IPO pricing process efficient?, Journal of Financial Economics 71, 3-26.
19. Lowry, Michelle,
and Kevin Murphy, 2007.
Executive stock options and IPO underpricing, Journal of Financial Economics
85, 39-65.
20. Lowry, Michelle, 2003. Why does IPO volume
fluctuate? Journal of Financial Economics
67, 3-40
21. *Pastor, Lubos, and Pietro Veronesi, 2005.
Rational IPO waves, Journal of Finance 60,
1713-1757.
22. Mikkelson, Wayne, Megan M. Partch, and
Kshitij Shah, 1997. Ownership and operating performance of companies that go
public, Journal of Financial Economics 44,
281–307.
23. Bernstein, S. 2015. Does going public affect innovation. Journal of Finance 70, 1365-1403.
Topic 12: (Dr. Huang) Mergers and
Acquisitions
·
Drivers
of M&A activity
·
Merger
wave
·
Merger
process
24. #Jensen, Michael, 1986. Agency costs of
free cash flow, corporate finance, and takeovers, American Economic Review 76, 323-329.
25. #Jensen, Michael C; and Richard S. Ruback,
1983. The market for corporate control: The scientific evidence, Journal of Financial Economics 11, 5-50.
26. @Andrade, Gregor, Mark Mitchell and Erik
Stafford, 2001. New Evidence and Perspectives on Mergers, Journal of Economic Perspectives 15, 103-20.
27. #Roll, Richard, 1986. The hubris
hypothesis of corporate takeovers, Journal
of Business 59, 197-216.
28. Dong, M., Hirshleifer, D., Richardson, S.,
Teoh, S., 2006. Does investor misvaluation drive the takeover market? Journal of Finance 61, 725-762.
29. Fu, F., Lin, L., Officer, M., 2013.
Acquisitions driven by stock overvaluation: are they good deals? Journal of Financial Economics 109,
24-39.
30. Shleifer, Andrei and Vishny, Robert W,
2003. Stock market driven acquisitions, Journal
of Financial Economics 70, 295-311.
31. *Harford, Jarrad, 1999. Corporate cash
reserves and acquisitions. Journal of
Finance 54, 1969-1997.
32. Malmendiera, Ulrike, Tate, Geoffrey, 2008.
Who makes acquisitions? CEO overconfidence and the market's reaction, Journal of Financial Economics 89, 20-43.
33. Bertrand, M., Mullainathan, S., 2003.
Enjoying the quiet life? Corporate governance and managerial preferences. Journal of Political Economy 111,
1043-1075.
34. Lee, Kyeong H., David Mauer, and Emma Xu,
2018. Human capital relatedness and mergers and acquisitions, Journal of
Financial Economics 129, 111-135.
35. Huang, Q, F. Jiang, E. Lie, and K. Yang.
2014. The role of investment banker directors in M&A, Journal of Financial Economics 112, 269–286.
36. Mitchell, M. and J. H. Mulherin, 1996. The impact of
industry shocks on takeover and restructuring activity. Journal of Financial Economics 41, 193-229.
37. Rhodes-Kropf, Matthew, and S. Viswanathan,
2004. Market valuation and merger waves, Journal
of Finance 59, 2685-2718.
38. *Rhodes–Kropf, Matthew, David T. Robinson,
and S. Viswanathan, 2005. Valuation waves and merger activity: The empirical
evidence, Journal of Financial Economics
77, 561-603.
39. Harford, Jarrad, 2005. What drives merger
waves? Journal of Financial Economics
77, 529-560.
40. Luo, Y., 2005. Do insiders learn from
outsiders? Evidence from mergers and acquisitions. Journal of Finance
60, 1951–1982.
41. Boone, Audra and Harold Mulherin, 2007.
How are firms sold? Journal of Finance 62, 847-875.
42. Bargeron, L., Schlingemann, F.P., Stulz,
R.M., Zutter C., 2008. Why do private acquirers pay so little compared to
public acquirers? Journal of Financial
Economics 89, 375-390.
43. Li, Kai, Tingting Liu, Juan Wu, 2018. Vote
avoidance and shareholder voting in mergers and acquisitions, Review of
Financial Studies 31, 3176-3211.
Topic 13: (Dr. Huang) Mergers and
Acquisitions (Cont’d)
·
Merger
gains and losses
·
Agency
costs, corporate governance and mergers
·
Cross-border
M&As
44. Bradley, M., A. Desai, and E.H. Kim, 1988.
Synergistic gains from corporate acquisitions and their division between the
stockholders of target and acquiring firms, Journal
of Financial Economics 21, 3-40.
45. Fuller, Kathleen, Jeffry Netter, and Mike
Stegemoller, 2002. What do returns to acquiring firms tell us? Evidence from firms that make many
acquisitions, Journal of Finance,
1763-1793.
46. *Moeller,Sara, F. P. Schlingemann, and
R.M. Stulz, 2005. Wealth destruction on a massive scale? A study of
acquiring-firm returns in the recent merger wave, Journal of Finance 60, 757-782.
47. Matvos, G., Ostrovsky, M., 2008.
Cross-ownership, returns, and voting in mergers. Journal of Financial Economics 89, 391–403.
48. Devos, Erik, Palani-Rajan Kadapakkam and
Srinivasan Krishnamurthy, 2009. How do mergers create value? A comparison of
taxes, market power, and efficiency improvements as explanations for synergies,
Review of Financial Studies 22,
1179-1211.
49. Hoberg, Gerard, and Gordon Phillips, 2010,
Product market synergies and competition in mergers and acquisitions: A
text-based analysis, Review of Financial Studies 22, 1179-1211.
50. Harford, Jarrad, Mark Humphery-Jenner, Ronan G. Powell, 2012. The sources of
value destruction in acquisitions by entrenched managers, Journal of Financial Economics.
51. Ahern, K., 2012. Bargaining power and
industry dependence in mergers, Journal
of Financial Economics 103, 530-550.
52. M. Zhao and K. Lehn, 2006. CEO turnover after
acquisitions: Do bad bidders get fired? Journal of Finance 61, 1759-1812.
53. *Masulis, Ronald W., Cong Wang, and Fei
Xie, 2007. Corporate governance and acquirer return, Journal of Finance 62, 1851-89.
54. Wang, C., Xie, F., 2009. Corporate
governance transfer and synergistic gains from mergers and acquisitions. Review of Financial Studies 22, 829-858.
55. Chari, A., Ouimet, P.P., Tesar, L.L.,
2010. The value of control in emerging markets. Review of Financial Studies 23, 1741–1770.
56. M.A. Ferreira, M. Massa, P. Matos, 2010.
Shareholders at the gate? Institutional investors and cross-border mergers and
acquisitions, Review of Financial Studies,
23, 601–644.
57. I. Erel, R.C. Liao, M.S. Weisbach, 2012.
Determinants of cross-border mergers and acquisitions, Journal of Finance, 67 (3) 1045–1082.
58. Bris, A., Cabolis, C., 2008. The value of
investor protection: Firm evidence from cross-border mergers. Review of Financial Studies 21, 605-648.
59. Ahern, K., Daminelli, D., Fracassi, C., 2012.
Lost in translation? The effect of cultural values on mergers around the world.
Journal of Financial Economics 117,
July 2015, 165–189.
60. Dessaint, O. A. Goluboy and P. Volpin,
2017. Employment protection and takeovers, Journal
of Financial Economics 125, 369-388.