Search results

1 – 10 of over 8000
To view the access options for this content please click here
Article
Publication date: 7 August 2017

Rexford Abaidoo

This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending.

Abstract

Purpose

This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending.

Design/methodology/approach

Empirical estimates are based on error correction and autoregressive distributed lag models.

Findings

The results suggest that, in the short run, inflation expectations, recession expectations and actual inflationary conditions tend to have a significant impact on risk premium estimates; in the long run, however, only inflation expectations and recession expectations are significant in risk premium estimates on lending.

Originality/value

This study examines how specific conditions of uncertainty and expectations influence variability in risk premium estimates on lending in the US economy.

To view the access options for this content please click here
Article
Publication date: 5 January 2021

Huy Will Nguyen, Zhu Zhu, Young Hoon Jung and Dong Shin Kim

What determines the level of acquisition premium? This paper aims to investigate the effect of acquirers’ social capital as reflected through their network position…

Abstract

Purpose

What determines the level of acquisition premium? This paper aims to investigate the effect of acquirers’ social capital as reflected through their network position (structural holes and network density) on the level of acquisition premiums.

Design/methodology/approach

This study predicts acquisition premiums using a panel data set of 324 mergers and acquisition (M&A) transactions including 161 unique acquirers over a 21-year timeframe. M&A and alliance information are obtained from the securities data company platinum database; firm financial data are obtained from the COMPUSTAT database.

Findings

The results show that alliance network social capital provides acquiring firms with information benefits, thus, reducing the acquisition premium. However, such information benefits are also contingent on target valuation uncertainty and acquirers’ structure exploitation tendency.

Practical implications

Different types of network structures provide different social capital influences: managers should be aware of their advantages and pitfalls when engaging in M&As. The findings suggest that firms should pay close attention to social capital when making decisions regarding acquisition premiums.

Originality/value

Past research has indicated that acquiring firms tend to overestimate the value of target firms. Still, little attention has been paid to organizational-level social capital in analyzing the determinants of acquisition premiums. This study offers insight into the effect of network structure on M&A acquisition premiums.

Details

Competitiveness Review: An International Business Journal , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1059-5422

Keywords

To view the access options for this content please click here
Book part
Publication date: 28 September 2020

Thomas C. Chiang

This chapter examines changes in US monetary policy uncertainty (ΔMPU) and fiscal policy uncertainty (ΔFPU) on stock returns while controlling for downside risk, lagged…

Abstract

This chapter examines changes in US monetary policy uncertainty (ΔMPU) and fiscal policy uncertainty (ΔFPU) on stock returns while controlling for downside risk, lagged dividend yield, and time series patterns. Testing G7 markets consistently shows that both ΔMPU and ΔFPU have significant negative impacts on stock returns. Evidence shows that any downside risk, ΔMPU or ΔFPU in US market will soon be transmitted to G6 industrial markets and the impacts are extended to two months. These risk and uncertainty premiums should be priced in the stocks of the major industrial markets.

Details

Emerging Market Finance: New Challenges and Opportunities
Type: Book
ISBN: 978-1-83982-058-8

Keywords

To view the access options for this content please click here
Article
Publication date: 10 December 2020

Thomas C. Chiang

Recent empirical studies by Antonakakis, Chatziantoniou and Filis (2013), Brogaard and Detzel (2015) and Christou et al. (2017) present evidence, which supports the notion…

Abstract

Purpose

Recent empirical studies by Antonakakis, Chatziantoniou and Filis (2013), Brogaard and Detzel (2015) and Christou et al. (2017) present evidence, which supports the notion that a rise in economic policy uncertainty (EPU) will lead to a decline in stock prices. The purpose of this paper is to examine US categorical policy uncertainty on stock returns while controlling for implied volatility and downside risk. In addition to the domestic impacts of policy uncertainty, this paper also presents evidence that changes in US policy uncertainty promptly propagates to the global stock markets.

Design/methodology/approach

This study uses a GED-GARCH (1, 1) model to estimate changes of uncertainties in US monetary, fiscal and trade policies on stock returns for the sample period of January 1990–December 2018. Robustness test is conducted by using different set of data and modeling techniques.

Findings

This paper contributes to the literature in several aspects. First, testing of US aggregate data while controlling for downside risk and implied volatility, consistently, shows that responses of stock prices to US policy uncertainty changes, not only display a negative effect in the current period but also have at least a one-month time-lag. The evidence supports the uncertainty premium hypothesis. Second, extending the test to global data reveals that US policy uncertainty changes have a negative impact on markets in Europe, China and Japan. Third, testing the data in sectoral stock markets mainly displays statistically significant results with a negative sign. Fourth, the evidence consistently shows that changes in policy uncertainty present an inverse relation to the stock returns, regardless of whether uncertainty is moving upward or downward.

Research limitations/implications

The current research is limited to the markets in the USA, eurozone, China and Japan. This study can be extended to additional countries, such as emerging markets.

Practical implications

This paper provides a model that uses categorical policy uncertainty approach to explain stock price changes. The parametric estimates provide insightful information in advising investors for making portfolio decision.

Social implications

The estimated coefficients of changes in monetary policy uncertainty, fiscal policy uncertainty and trade policy uncertainty are informative in assisting policymakers to formulate effective financial policies.

Originality/value

This study extends the existing risk premium model in several directions. First, it separates the financial risk factors from the EPU innovations; second, instead of using EPU, this study investigates the effects from monetary policy, fiscal policy and trade policy uncertainties; third, in additional to an examination of the effects of US categorical policy uncertainties on its own markets, this study also investigates the spillover effects to global major markets; fourth, besides the aggregate stock markets, this study estimates the effects of US policy uncertainty innovations on the sectoral stock returns.

Details

The Journal of Risk Finance, vol. 21 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

To view the access options for this content please click here
Book part
Publication date: 19 June 2019

Nicholas Dew and Stuart Read

Tucked in the back of Venkataraman’s 1997 work on the distinctive domain of entrepreneurship (DDE) lies a pointer to a question each individual must face when choosing to…

Abstract

Tucked in the back of Venkataraman’s 1997 work on the distinctive domain of entrepreneurship (DDE) lies a pointer to a question each individual must face when choosing to start a new venture; “is entrepreneurship worth it?” Inventorying costs associated with risk, uncertainty, and illiquidity against surpluses from financial and psychological factors unique to entrepreneurship, Venkataraman tempts readers to tally entrepreneurial returns. The authors summarize and integrate an academic study of these various cost and return components over the past 20 years using Venkataraman’s original framework. The authors find the answer to the question of “is entrepreneurship worth it?” varies with time. Researcher’s answer to the question has shifted from an early view that entrepreneurs sacrifice financial gain in exchange for soft psychological benefits to a more positive view that entrepreneurs are rewarded both financially and psychologically for the unique costs borne in the DDE. But the rewards are not immediate. In entrepreneur time, break-even emerges by gradually overcoming an initial deficit. As surpluses accrue, returns to entrepreneurs likely eventually exceed those of their wage-earning peers.

To view the access options for this content please click here
Book part
Publication date: 22 July 2021

Thomas C. Chiang and Xi Chen

This study finds evidence that a stock return is inversely correlated with downside risk, confirming a pattern of risk-aversion behavior. Evidence from testing a stock…

Abstract

This study finds evidence that a stock return is inversely correlated with downside risk, confirming a pattern of risk-aversion behavior. Evidence from testing a stock return's response to a change in economic policy uncertainty indicates a significantly negative effect in the Chinese stock market; this conclusion holds true for testing the impacts of changes in fiscal and monetary policy uncertainties. However, the data produce a mixed effect for the change in fiscal policy uncertainty. The evidence produced from examining the geopolitical effect on the stock market strongly supports the presence of an adverse effect on stock market performance.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80043-870-5

Keywords

To view the access options for this content please click here
Case study
Publication date: 29 June 2021

Sebastian Prim and Mikael Samuelsson

The case is suitable for strategy or entrepreneurship modules. It is designed to teach students about the importance of implementing formal processes when entering a…

Abstract

Subject area of the teaching case:

The case is suitable for strategy or entrepreneurship modules. It is designed to teach students about the importance of implementing formal processes when entering a growth phase as well as the complexities, unexpected costs, and benefits that growing a business can bring.

Student level:

The case is aimed at MBA or Master-level students or executive education programmes as part of a strategy or entrepreneurship module.

Brief overview of the teaching case:

Lattice Towers is a South African company in the telecommunications infrastructure sector. They are struggling to generate sufficient cash flow to sustain operations as a result of poor strategic decision-making regarding tower-build site acquisition. To compound matters, the owner has been struggling with health issues related to the stress caused by the crises that Lattice Towers is going through. Recently, however, a multinational publicly listed behemoth in the telecommunications industry, Helios Towers, offered to acquire the company. The acquisition offer seems like a saving grace to the owner; however, Lattice Towers is deeply personal to the him and he would not like to lose the brand. Furthermore, there is a tremendous opportunity for business growth due to the imminent increase in demand for tower infrastructure. But based on the challenging financial position the business currently finds itself in, he might not have the option to keep the business.

Expected learning outcomes:

To develop a decision-making framework and strategy to navigate the business life-cycle stages, from survival to growth

Understand the concepts of uncertainty, risk, and liquidity premiums that apply to entrepreneurship

Understand the stress-related implications for entrepreneurs

Understand the psychological costs and benefits of entrepreneurship

Understand the personal financial implications for entrepreneurship

Details

The Case Writing Centre, University of Cape Town, Graduate School of Business, vol. no.
Type: Case Study
ISSN: 2633-8505
Published by: The Case Writing Centre, University of Cape Town, Graduate School of Business

Keywords

To view the access options for this content please click here
Article
Publication date: 29 October 2020

Richard P. Gregory

The purpose of this study is to examine the bi-directional causality between political uncertainty and the market risk premium in the US.

Abstract

Purpose

The purpose of this study is to examine the bi-directional causality between political uncertainty and the market risk premium in the US.

Design/methodology/approach

I use a theoretical model to motivate signs and then check signs based on a vector autoregression.

Findings

I find that political uncertainty has a small positive, delayed effect on the market risk premium. The market risk premium, on the other hand, has a large permanent, negative effect on political uncertainty.

Originality/value

This is the first research paper to consider the bi-directional effects of political uncertainty on the market risk premium and vice versa. It also finds interesting empirical results.

Details

Managerial Finance, vol. 47 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 17 July 2019

Thomas C. Chiang

The purpose of this paper is to investigate the risk and economic policy uncertainty (EPU) shocks on China’s equity markets while controlling for changes in sentiments and…

Abstract

Purpose

The purpose of this paper is to investigate the risk and economic policy uncertainty (EPU) shocks on China’s equity markets while controlling for changes in sentiments and liquidity.

Design/methodology/approach

The GED-TARCH(1,1)-M procedure is used in estimations to deal with the heteroscedasticity problem.

Findings

Evidence shows that stock returns are positively correlated with predictable volatility and lagged downside risk. This study indicates that the stock returns are negatively correlated with both local and global uncertainty innovations. The test results are robust across different measures of stock returns and model specifications. The global EPU innovations have more profound impact on stock returns than that of Chinese EPU.

Research limitations/implications

The findings are based on the data in the China’s stock market, other global markets may be considered in the future research.

Practical implications

Evidence indicates that a rise in EPU produces a negative effect on stock returns at the time news hits a market; however, investors will be rewarded by a premium as prices rebound in the subsequent period for compensating the investment decision made at a high uncertainty period.

Originality/value

The excess stock returns are negatively related to the EPU innovations, regardless of whether EPU originates from a domestic source or external sources.

Details

China Finance Review International, vol. 9 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

To view the access options for this content please click here
Article
Publication date: 25 February 2020

Steve Fortin, Ahmad Hammami and Michel Magnan

This study examines the long-term link between fair valuation uncertainty and discounts/premia in closed-end funds. This study argues that, in exploring the close-end…

Abstract

Purpose

This study examines the long-term link between fair valuation uncertainty and discounts/premia in closed-end funds. This study argues that, in exploring the close-end funds puzzle, prior research generally omits to consider the uncertainty surrounding the measurement of funds' financial disclosure, as reflected in the fair value hierarchy, when investment specialty differs across funds.

Design/methodology/approach

Regressions were employed to explore how the fair value hierarchy affects closed-end funds' discounts/premia when investment specialty differs. The authors also examine the effects pre- and post-2012 to explore if that relationship changes due to the additional disclosure requirements enacted at the end of 2011.

Findings

The authors find that the three levels of the fair value hierarchy have effects that vary according to a fund's specialty. For equity specialized funds, Level 3 significantly increases discounts and decreases premia, suggesting the impact of valuation uncertainty that underlies Level 3 estimates; this relationship disappears (decreases in severity) for premia (discount) experiencing funds post-2012. In contrast, Level 1 and Level 2 do not have any significant effect on discounts or premia except that post-2012, Level 2 begins to display discount decreasing effects. For bond specialized funds, no significant association was noted between premia and any of the fair value levels except that post-2012, Level 3 begins to display premium increasing effects. However, results are different for discounts. The authors note that Level 1 valuations significantly increase discounts, but only post-2012; Level 2 valuations significantly decrease discounts (pre- and post-2012), consistent with such estimates incorporating unique and relevant information; and Level 3 valuations do not have a significant effect on discounts.

Originality/value

The results of this study revisit prior evidence and indicate that results about the effects of fair value measurement and the closed-end funds' puzzle are sensitive to the period length being considered and the investment specialty of the fund. The authors also note that additional disclosure regarding Level 3 valuation inputs decreases market concern for valuation uncertainty and increases the liquidity benefits of investing in Level 3 carrying funds.

Details

Managerial Finance, vol. 46 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

1 – 10 of over 8000