Browsing Finance by Subject "Business Administration, General"
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- ItemESSAYS IN INTERNATIONAL FINANCE(2010) Makaew, Tanakorn; MAKSIMOVIC, VOJISLAV; Business and Management: Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation consists of three essays on international capital flows. In the first essay, titled "Do small firms benefit more from foreign portfolio investment? Evidence from a Natural Experiment," I test whether an increase in the supply of foreign portfolio capital benefits small firms by using the Thai government's unique restriction on capital inflows as a natural experiment. The Thai government imposed a very stringent capital control on December 19, 2006, and then quickly abandoned it one day later. Although many other studies have been plagued with the difficulty of separating the impact of foreign capital from the impact of other concurrent events, this experiment helps me solve the time-series identification problem. My results suggest that foreign portfolio investment helps large firms the most, contrary to existing evidence, which finds a benefit in foreign portfolio investment for small firms. I also investigate the importance of other firm characteristics correlated with size, which includes a firm's exchange rate exposure, foreign ownership, and political connection. The next two essays are on the dynamic patterns of international mergers and acquisitions. In the second essay, I uncover key facts about international M&As by estimating a variety of reduced form models. I find that: (1) Cross-border mergers come in waves that are highly correlated with business cycles. (2) Most mergers occur when both the acquirer and the target economies are booming. (3) Merger booms have both an industry-level component (productivity shocks) and a country-level component (financial shocks). (4) Across over one million observations, acquirers tend to be more productive and targets tend to be less productive, compared to their industry peers. These facts are consistent with the neoclassical theory of mergers in which productive firms expand overseas to seize new investment opportunities, but not with the widely held views that most cross-border mergers occur when the target economies are in a recession or face a financial crisis. In the third essay, I construct a dynamic structural model of cross-border mergers and integrate the important facts above into the model. This dynamic structural approach allows me to quantify the effects of productivity and financial shocks on M&A decisions. In addition, this approach provides a proper analytical framework for conducting policy experiments. As an example of such analyses, I investigate the impact of President Obama's proposal on multinational corporation taxation. My simulation results suggest that the foreign operation tax has economically significant effects on productive firms and can be very distortionary for cross-border mergers.
- ItemSecurities Fraud: An Economic Analysis(2005-04-20) Wang, Yue; Senbet, Lemma W.; Prabhala, Nagpurnanand; Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This thesis develops an economic analysis of securities fraud. The thesis consists of a theory essay and an empirical essay. In the theory essay, I analyze a firm's propensity to commit securities fraud and the real consequences of fraud. I show that fraud can lead to investment distortions. I characterize the nature of the distortions, and show that it results from fraud-induced market mispricing and management's ability to influence the firm's litigation risk through investment. The theory also characterizes the equilibrium supply of fraud. I demonstrate the linkages between a firm's fraud propensity and the structure of its assets in place and growth options, and analyze the effect of corporate governance on fraud. The theory provides testable implications on cross-sectional determinants of firms' fraud propensities and the relation between fraud and investment. In the empirical essay, I test my main model predictions, using a new hand-compiled fraud data set. I use econometric methods to account for the unobservability of undetected frauds, and disentangle the effects of cross-sectional variables into their effect on the probability of committing fraud and the effect on the probability of detecting fraud. I find that the level, type, and financing of investment all matter in determining the probability of fraud and the likelihood of detection. I also examine the monitoring roles of large shareholders, institutional owners, independent auditors, and corporate boards. I find that large block or institutional holdings tend to discourage fraud by increasing the detection likelihood. The roles of independent auditors and corporate board are weaker. Finally, insider equity incentives, growth potential, external financing needs and profitability all influence a firm's propensity to commit fraud. The paper also demonstrates the importance of separating fraud commitment and fraud detection, because cross-sectional variables can have opposing effects on these two components, and therefore can be masked in their overall effect on the incidence of detected fraud.