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Surveys of senior real estate executives have previously indicated that real estate represents approximately 25 per cent of corporate worth. These surveys, however, relied on self reported estimates of current real estate value. This study uses objective data to investigate the proportionate value that real estate represents on corporate balance sheets. The findings indicate that, when buildings are adjusted for inflation, real estate represents about 40 per cent of total corporate assets. Since corporate worth may also be measured in market value terms, several indexes were constructed to measure the proportion of firm market value represented by real estate assets. With buildings inflation adjusted, real estate represents about 80 per cent of firm market value. Although firm size does have an impact on all the ratios computed in this study, the impact is fairly modest in virtually all cases

The purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes.

This study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day.

This study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand.

This study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.

The purpose of this study is to examine the association between the financial expertise of the chief financial officer (CFO) and concerns about corporate governance.

Consistent with prior research, the authors used four variables, including certified public accountant (CPA) certification, Master of Business Administration degree, age of CFO and length of CFO tenure, to measure CFO’s financial expertise. The authors hypothesize a negative association between CFO expertise and concerns about corporate governance.

Regression analysis revealed that the CPA certification is negatively associated with governance concerns at a significant level. The results suggest that stakeholders show less concerns about a company’s corporate governance mechanism when the CFO has a CPA certification. In particular, the results support the recommendation by the American Institute of Certified Public Accountants that a CFO of a public firm should have a CPA certification.

The study is important in the following ways. First, the study delivers new evidence on the link between CFO financial expertise and corporate governance. This contributes to the CFO financial expertise literature and the corporate governance literature. Second, according to Standard and Poor’s, equity index investing has grown more popular over the past 30 years. The study delivers useful information to index investors who invest in S & P SmallCap 600 Index. Third, regulators have put a large amount of resources to discover ways to strengthen firms’ corporate governance. Thus, the results should be of interest to policy makers who design and implement guidelines on corporate governance mechanisms.

The purpose of this paper is to investigate the initial public offerings (IPOs) of the firms that are eventually included in one of the S&P 400, the S&P 500, or the S&P 600 Indices. Do these firms have very different IPO features than the rest of the IPOs?

The control sample is formed of IPOs that are not included in the corresponding index, and the IPOs that end up in each S&P index are compared to this control sample. Logistic regressions are utilized to estimate the odds of inclusion into one of these indices.

The author finds that the IPO features, such as underpricing, offer price, underwriter's reputation, venture capital presence, and so on, are found to be substantially different for the index samples. The index firms are found to be “superstars” that deliver extremely high long‐run returns between their IPO date and their index inclusion date. The above results suggest that the quality of index firms has a persistent component to it that can be detected even during the IPO process. After estimating the determinants of the index inclusion, the author discovers that factors implying lower asymmetric information about firm's business (such as, the firm being a spinoff, or being certified by a venture capitalist or a prestigious underwriter, etc.) increase its odds of inclusion.

The paper proposes and tests two new hypotheses related to inclusion into an S&P index. Discoveries made in this paper can help someone recognize which IPOs could become “superstars” that end up in an S&P index.

Small public family firms apply contracting differently given the peculiar motivations of founding families and the degree to which they monitor operations. The purpose of this paper is to examine the effects of family ownership, control, and CEO dividends on CEO incentive compensation.

The sample consisted of 194 firms, covering about 40 percent of the relevant S&P SmallCap 600 firms. Employed were a logistic regression of the presence of incentive compensation plan and a panel regression of incentive compensation ratio against the family ownership, family CEO, CEO ownership, and dividend income variables as well as firm-specific and CEO-specific control variables.

For 1,532 firm-year observations among S&P SmallCap600 index firms during 1999-2007, the authors found that family ownership and CEO dividend income ratio negatively related to the likelihood of an incentive compensation plan and to the ratio of equity-based compensation to total CEO pay. Additionally, the effect of CEO dividend income was limited to firms with outside CEOs.

Boards of small capitalization firms should consider the incentive effects of CEO dividend income and CEO family membership when setting their compensation policies.

S&P SmallCap600 index firms are unique because they are much smaller than those listed in the S&P 500 or the Fortune 500, and are subject to more family influence. SmallCap firms are comparable in size to the foreign firms previously researched but are still well covered by analysts, and benefit from audited financial statement variables, which include dividends and stock market returns.

Prior research on additions to the S & P 500 and the smaller MidCap 400 and SmallCap 600 indexes reach different conclusions regarding the key variables that explain the cross-section of announcement period abnormal returns. Most notable in this regard is that liquidity measures, long thought to be of importance, do not appear to explain abnormal returns of the S & P 500 when other factors are controlled for. By contrast, they do appear to matter for additions to the smaller stock indexes. To explore this difference, the purpose of this paper is to analyze the abnormal returns upon announcement that a stock will be added to the Nasdaq-100 Index in a cross-sectional manner, controlling for several possible alternative factors.

This paper analyzes abnormal returns upon announcement that a stock will be added to the Nasdaq-100 Index. The authors consider several possible sources of the positive price effects in a multivariate setting that controls simultaneously for measures of liquidity, arbitrage risk, operating performance and investor interest and awareness. The authors then analyze both trading volume and the bid-ask spreads. The authors finally examine analyst and investor interest, focussing on changes in analyst coverage.

The authors find that only liquidity variables are significant, but that factors representing feedback effects on the firm’s operations and level of managerial effort are not. The authors find that the average bid/ask spreads of stocks added to the Nasdaq-100 index are lower after the addition. The authors also find that the number of analysts following a stock increases significantly after addition, verifying increased analyst interest. Both forms of evidence are consistent with the hypothesis that the additions are associated with enhanced liquidity for the stocks.

The authors conclude that what does happen to a Nasdaq stock when it is announced that it will be added to the Nasdaq-100 Index is that more analysts are drawn to it, and its market liquidity is enhanced. The authors conclude that what does not happen is that there is no evidence of significant effects of enhanced managerial effort or operating performance associated with the inclusion. This difference is noteworthy because it suggests that a certification effect of additions to the S & P indexes associated with S & P’s selection process are unique to it and do not apply to the Nasdaq-100 Index additions based on market cap alone. The results provide indirect evidence on the existence and significance of the certification effect associated with additions to the S & P indexes.

The purpose of this paper is to examine changes in stock returns, liquidity, institutional ownership, analyst following and investor awareness for companies added to and deleted from the Dow Jones Industrial Average (DJIA) index. Previous studies report conflicting evidence regarding the market reactions to changes in the DJIA index membership.

This study uses the event-study methodology to calculate abnormal returns and trading volume around the announcement and effective days of DJIA index changes from 1929 to 2015. It also tests for significant changes in liquidity, institutional ownership, analyst following and investor awareness in the 1990–2015 period. Multivariate regressions are used to perform a simultaneous analysis of competing hypotheses.

This study resolves the mixed results of previous DJIA index papers by documenting different stock price and trading volume reactions over the 1929–2015 period. Focusing on the most recent period, 1990–2015, the study finds that stocks added to (deleted from) the index experience a significant permanent stock price gain (loss). The observed stock price reaction seems to be associated with changes in liquidity proxies thus lending support for the liquidity hypothesis.

Limited data availability for the periods prior to 1990 prevents this study from identifying the exact reasons for different stock price and trading volume reactions across subperiods of the 1929–2015 period.

This study provides the most comprehensive examination of market reactions to changes in the DJIA index and resolves the mixed results of previous studies. A better understanding of market reactions around the DJIA index changes can help both individual and institutional investors with developing effective trading strategies and index managing companies with designing optimal announcement policies.

This study aims to introduce a tree-structured linear and quantile regression framework to the analysis and modeling of equity returns, within the context of asset pricing.

The approach is based on the idea of a binary tree, where every terminal node parameterizes a local regression model for a specific partition of the data. A Bayesian stochastic method is developed including model selection and estimation of the tree structure parameters. The framework is applied on numerous U.S. asset pricing models, using alternative mimicking factor portfolios, frequency of data, market indices, and equity portfolios.

The findings reveal strong evidence that asset returns exhibit asymmetric effects and non- linear patterns to different common factors, but, more importantly, that there are multiple thresholds that create several partitions in the common factor space.

To the best of the authors' knowledge, this paper is the first to explore and apply a tree-structured and quantile regression framework in an asset pricing context.

As a result of scandals concerning major financial crime in the early twenty‐first century, including accounting and auditing fraud and inappropriate behavior by directors on the boards of US corporations, Congress hurriedly enacted the Sarbanes‐Oxley Act (SOX) in 2002. SOX's major purpose was to restore investor confidence in America's securities markets. Small firms argued that their cost of compliance was very heavy and that their burden was greater than for larger firms, especially the costs related to section 404 of the Act, which dealt with new requirements to obtain independent audit opinions. The authors found no empirical research that supports or denies these claims. Subsequently, in 2007, the Securities and Exchange Commission reduced the Act's new audit requirements for small companies. This paper aims to examine audit fees for large and small firms.

The study examines actual audit fee data to investigate the increased costs paid by publicly traded companies to independent audit firms for their services due to Sarbanes‐Oxley. The authors use univariate and multivariate statistical methods to compare increases in audit fees paid by samples of 150 large firms and 150 small firms.

The study finds that both small and large firms incurred increased audit fees due to compliance with Sarbanes‐Oxley, and that small companies did incur larger increases in their cost burden.

The study uses actual audit fee data reported to the Securities and Exchange Commission and controls for other factors that determine audit fees in reaching its conclusions.

The purpose of this study is to investigate the value investors place on S&P index additions relative to uncertainty surrounding the firm and the market. Investors look for reassuring signals or tell-tale signs around uncertainty.

Variation in the market response to announcements of S&P additions to the 400, 500 and 600 indices is examined against measures of risk factors. Internal risk factors include firm size relative to the index, total firm risk and liquidity, and whether the firm is a brand new index entrant. External risk factors related to market uncertainty are measured by the Chicago Board of Exchange volatility index.

Firms with lower market capitalization relative to the index, higher total risk, lower trading volume and first-time entrants to any S&P index elicit a positive market reaction compared to firms with less pricing uncertainty. In times of increased market uncertainty, investors tend to place more value on signals from respected institutions such as S&P, and riskier firms benefit more from inclusion in the S&P index. Overall, this study finds that the market overreaction is explained by the degree of uncertainty surrounding the added firms, as well as by the degree of market uncertainty at the time of the announcement.

The findings of this study suggest that investors interpret the prospect of S&P index addition as an opportunity for firms to reduce uncertainty surrounding them, and thus partially hedge their exposure to market uncertainty by joining an index tracked by dozens of index funds. The value of such a hedging strategy rises for riskier firms during market turbulence.