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Article
Publication date: 31 December 2015

Nan Liu and Jamshid Mehran

The purpose of this paper is to investigate whether firms repurchase shares to meet or just beat their dividend target as managers perceive share repurchases are more…

Abstract

Purpose

The purpose of this paper is to investigate whether firms repurchase shares to meet or just beat their dividend target as managers perceive share repurchases are more flexible than dividends and managers have a strong desire to maintain dividend levels and dividend payout ratio of the firms.

Design/methodology/approach

The authors first run a Tobit regression to examine whether firms meeting or just beating the quarterly dividend per share threshold exhibit unusually high repurchases, controlling for the factors shown to affect repurchases. The authors then calculate abnormal repurchases and compare firms that would otherwise miss the benchmark with other firms.

Findings

The authors find that firms meeting or just beating the quarterly dividend per share threshold repurchase more shares than other firms, after controlling for the substitution effect, investment opportunities and financial performance. In addition, firms otherwise missing the quarterly dividend per share threshold repurchase abnormally more shares to meet the threshold.

Originality/value

The study contributes to the payout policy literature in the following ways. First, it extends the understanding of the association between dividend payout and repurchase. Second, it contributes to the threshold literature by showing that firms manipulate repurchases in addition to earnings to meet their quarterly dividend per share threshold. Third, it provides support to the survey evidence that firms have a strong desire to maintain their dividend policies.

Details

Managerial Finance, vol. 42 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 8 June 2012

Jamshid Mehran, Alex Meisami and John R. Busenbark

The purpose of this paper is to investigate the impact of Jewish holidays on US stock market returns.

Abstract

Purpose

The purpose of this paper is to investigate the impact of Jewish holidays on US stock market returns.

Design/methodology/approach

The authors use event study and regression methodology to determine abnormal returns on Jewish holidays and windowed periods surrounding the day. In order to seclude the results to Jewish holidays, the authors control for several other known events that impact stock market returns. To substantiate claims of abnormal returns, the authors also use the Fama‐French four‐factor model to seek alpha and evidence returns on Jewish holidays.

Findings

This study shows, during the 1990‐2009 period, an increase in average daily returns 32 times greater on nine Jewish holidays than on the other trading days of the year. The demeanor of the specific Jewish holidays also influences stock market returns, as the market returns increase (decrease) on the joyous (solemn) Jewish holidays. Also, individual investors, rather than institutional investors, are a greater catalyst for the increased returns.

Originality/value

Previous research details increased stock market returns on US holidays and several other events. However, no definable research exists on stock market returns on Jewish holidays. The findings in this paper are valuable to investors who event‐trade, and are also valuable to investors and behavioral‐finance researchers who seek to understand how demeanor and moods may impact buying/selling decisions.

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Article
Publication date: 13 April 2015

Haiyan Yin, Jiawen Yang and Jamshid Mehran

As part of the banking reform, major commercial banks in China went through initial public offerings (IPOs) in the past two decades. Has this change in the ownership…

Abstract

Purpose

As part of the banking reform, major commercial banks in China went through initial public offerings (IPOs) in the past two decades. Has this change in the ownership structure led to improvement in their performance? With a comprehensive data set of Chinese banks over 1999-2010, the purpose of this paper is to investigate the effects of IPOs on bank performance in China.

Design/methodology/approach

The authors employ a stochastic frontier approach (SFA) to measure bank efficiency and assess the selection and dynamic effects of public listing.

Findings

The authors find strong selection effects. That is, banks that choose to go public are significantly more efficient than those that do not. However, the analysis of the dynamic effects shows no evidence that bank efficiency improves after going public, either in the short run or in the long run. The authors further look into bank performance around IPO events with non-parametric analysis and find that banks significantly outperform their counterparts prior to IPOs, but this superior performance disappears immediately after IPOs. This evidence is consistent with the “window dressing” hypothesis that firms time new issues to take advantage of windows of opportunity.

Originality/value

This is the first study that addresses the performance of IPO banks measured with SFA in China after 2005 when the major Chinese banks were listed.

Details

Managerial Finance, vol. 41 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 14 October 2013

Hunter Matthew Holzhauer, Xing Lu, Robert W. McLeod and Jamshid Mehran

– This study aims to look into how volatility significantly impacts the tracking error for daily-rebalanced leveraged bull and bear ETFs.

Abstract

Purpose

This study aims to look into how volatility significantly impacts the tracking error for daily-rebalanced leveraged bull and bear ETFs.

Design/methodology/approach

Using Morningstar return data and Chicago Board Options Exchange (CBOE) volatility index (VIX) data, the paper examines the daily tracking error for leveraged bull and bear ETFs. Tracking error is defined as the difference between the daily returns for a leveraged bull or bear ETF and the multiple of the daily return for that ETF's respective underlying benchmark index.

Findings

Changes in the market VIX of the CBOE have a significant and opposite effect on the daily returns for both leveraged bull and bear ETFs. Furthermore, these effects are more pronounced for bear ETFs than similarly leveraged bull ETFs.

Research limitations/implications

The sample period (June 19, 2006 to September 22, 2009) contains periods of extraordinarily high volatility. Considering that the VIX reached an all-time high during this period, the results may be time-period specific and may not translate to other time periods.

Practical implications

The implication is that market timing may be feasible for enhancing daily returns for both leveraged bull and bear ETFs. However, any specific timing strategies go beyond the scope of this paper.

Originality/value

In this study, the paper examined the effects of expected market volatility on the daily tracking error of leveraged bull and bear ETFs. Specifically, the paper performed multiple linear regression analysis using Morningstar return data for the ETFs and their underlying benchmark and CBOE VIX data. The findings suggest that market timing could be beneficial for increasing daily yields for leveraged and inverse ETFs.

Details

Managerial Finance, vol. 39 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 3 July 2009

Arman Kosedag, Jamshid Mehran and Jinhu Qian

The purpose of this paper is to examine the informational asymmetry (informational advantage of managers) in leveraged buyout (LBO) transactions.

Abstract

Purpose

The purpose of this paper is to examine the informational asymmetry (informational advantage of managers) in leveraged buyout (LBO) transactions.

Design/methodology/approach

Unlike previous studies of informational asymmetry in LBOs, this research uses a set of reverse‐LBO and re‐LBO firms. The paper proposes and empirically tests three hypotheses that draw on the informational advantage of managers in LBOs. Specifically, the value gain (VG) realized by the reverse‐LBO firms is compared with that realized by a control sample of firms; the wealth distribution between managers and pre‐buyout shareholders is studied; and, finally, the performance of re‐LBO firms relative to reverse‐LBO firms is evaluated.

Findings

The results do not support the view that managers use buyouts to exploit their informational advantage. Specifically; the performance of LBO firms under the private ownership is comparable to those of matching public firms; the management team's return in a LBO deal is not significantly more than pre‐buyout shareholders’ return; and repeating reverse‐LBO firms (re‐LBOs) do not necessarily perform better than the non‐repeating reverse‐LBO firms.

Originality/value

While reverse‐LBOs have been investigated to some extent in the prior literature, studies on re‐LBOs are quite scant – although these transactions offer a new and interesting avenue to examine the motivations behind LBOs in general. The use of the entire LBO − reverse‐LBO − re‐LBO cycle in testing the informational advantage of managers is a novelty. It is hoped that re‐LBOs will attract the amount of attention they deserve as these firms may offer interesting means to reinvestigate commonly debated theories of corporate finance.

Details

Managerial Finance, vol. 35 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

Content available
Article
Publication date: 31 December 2015

Monzurul Hoque

Abstract

Details

Managerial Finance, vol. 42 no. 1
Type: Research Article
ISSN: 0307-4358

Abstract

Details

Managerial Finance, vol. 41 no. 4
Type: Research Article
ISSN: 0307-4358

Content available
Article
Publication date: 8 June 2012

Monzurul Hoque

Abstract

Details

Managerial Finance, vol. 38 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 13 April 2015

Mustafa Dah, Monzurul Hoque and Song Wang

The purpose of this paper is to examine the impact of Shariah guidelines on the performance of the Dow Jones Islamic Index (DJIM-US). Shariah or Islamic law is a set of…

Abstract

Purpose

The purpose of this paper is to examine the impact of Shariah guidelines on the performance of the Dow Jones Islamic Index (DJIM-US). Shariah or Islamic law is a set of rules that determines Islamic allowed activities including socially and ethically acceptable investments.

Design/methodology/approach

The authors apply four risk-adjusted methodologies and co-integration analysis to investigate whether limited asset universe Shariah investments limit investment opportunities and impose an opportunity cost on investors given the prediction of conventional portfolio theories.

Findings

In contrast to the prediction of conventional portfolio theories, the findings suggest no apparent opportunity cost for Shariah compatible investments. In particular, Dow Jones Islamic Mutual Funds do not under-perform the broader market US benchmarks nor do they have any co-integration with the broader indexes. Moreover, the authors find similar evidence in the studies of Islamic mutual funds in Saudi Arabia, Malaysia and Kuwait.

Research limitations/implications

The findings will be reinforced when the authors will look into long run performance of Shariah compliant funds in future. Using non-linear approach will add further clarity to the findings.

Practical implications

The results provide an insight suggesting that successful mutual fund managers are able to overcome Shariah restrictions and constraints through creative investment strategies. In the data set, the Amana Trust Growth fund and the Amana Trust Income fund were always the best performers with a highly significant abnormal return, no matter what the methodology was.

Social implications

The performance of Islamic funds during the approximately seven-year period covered by the study is very promising. Popularity of Islamic Investment is expected to grow as Muslim population represents about 25 percent of the world population and the possibility for the Muslim funds to be considered as viable alternative by non-Shariah abiding or non-Muslim investors. The empirical results in the paper provide evidence that lack in diversification did not constrain the performance of Islamic funds.

Originality/value

This paper applied comprehensive risk-adjusted methodologies and co-integration analysis to Islamic Funds for a seven-year period for multiple countries. The findings confirm previously obtained results and highlight the fact that constrained Islamic Funds may not under-perform as per conventional portfolio theories.

Details

Managerial Finance, vol. 41 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

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