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CEO SOCIAL CAPITAL AND STOCK PRICE INFORMATIVENESS: US AND INTERNATIONAL PERSPECTIVES
Title
CEO SOCIAL CAPITAL AND STOCK PRICE INFORMATIVENESS: US AND INTERNATIONAL PERSPECTIVES.
Creator
Malinin, Artem, Garcia-Feijoo, Luis, Florida Atlantic University, Department of Finance, College of Business
Abstract/Description
In Essay 1, I investigate the association between CEOs’ social capital and stock price informativeness in a sample of US firms. After accounting for the fact that larger networks attract more analysts following, I find that firms with larger CEO social capital exhibit higher private information incorporation and hence more informative stock prices. Results are consistent for five different proxies for stock price informativeness. Furthermore, the positive association between social capital...
Show moreIn Essay 1, I investigate the association between CEOs’ social capital and stock price informativeness in a sample of US firms. After accounting for the fact that larger networks attract more analysts following, I find that firms with larger CEO social capital exhibit higher private information incorporation and hence more informative stock prices. Results are consistent for five different proxies for stock price informativeness. Furthermore, the positive association between social capital and informativeness is driven by more diverse networks, as measured by gender, nationality, education, or professional diversity. Overall, results suggest that private information existing in networks may result in markets that are more informationally efficient. In Essay 2, I show that CEOs’ social capital has a positive impact on stock price informativeness in an international sample. Different robustness and endogeneity tests confirm those results. Moreover, I find that factors present at the country level can mitigate or reinforce social capital’s impact on informativeness. I consider characteristics not observable within one country that can influence such relation around the world including legal, cultural, and developmental. I uncover that for more developed countries and those with a higher quality of institutions a positive impact of social connectedness is more pronounced. In addition, I show the importance of CEOs’ connections characteristics for their impact on stock price informativeness. I find that if CEOs’ connections come from developed countries or countries that have better formal and informal institutions which affect information transparency, CEOs’ social capital becomes more important for informativeness.
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Date Issued
2022
PURL
http://purl.flvc.org/fau/fd/FA00013973
Subject Headings
Chief executive officers, Social capital (Sociology), Stocks--Prices
Format
Document (PDF)
Corporate diversification: organization capital, organic growth, and long-term performance
Title
Corporate diversification: organization capital, organic growth, and long-term performance.
Creator
Smith, Garrett C., Garcia-Feijoo, Luis, Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
Corporate diversification is a core topic in Financial Economics. The desire to better understand why a firm elects to diversify as opposed to increase in scale is the motivation of this dissertation. To accomplish this goal I test a number of dynamic models of corporate diversification, with similar predictions, to better understand the dynamic choice to diversify. I find that several previously untested models do indeed provide insight as to why a firm would diversify (Essay One). In...
Show moreCorporate diversification is a core topic in Financial Economics. The desire to better understand why a firm elects to diversify as opposed to increase in scale is the motivation of this dissertation. To accomplish this goal I test a number of dynamic models of corporate diversification, with similar predictions, to better understand the dynamic choice to diversify. I find that several previously untested models do indeed provide insight as to why a firm would diversify (Essay One). In particular two firm traits, firm talent which I use the proxy of organization capital and asset specificity which I use the proxy of asset tangibility, are strongly related to propensity of the firm to engage in corporate diversification for the first time.
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Date Issued
2015
PURL
http://purl.flvc.org/fau/fd/FA00004468, http://purl.flvc.org/fau/fd/FA00004468
Subject Headings
Competition, Corporate reorganizations, Corporations -- Growth, Diversification in industry, Economics -- Sociological effects, Industrial organization
Format
Document (PDF)
Essays in Return Predictability After Large Price Shocks
Title
Essays in Return Predictability After Large Price Shocks.
Creator
Brady, Kevin P., Garcia-Feijoo, Luis, Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
In Essay 1, I use cross-country differences in investors’ traits — trust, patience, overconfidence, and risk tolerance — to test the underreaction, overreaction, and uncertain information theories of stock returns. I find that investors’ reactions to large daily stock price shocks vary between lower and higher levels of these traits. Specifically, investors with lower levels of trust and more patience underreact more (or overreact less) to price shocks, which aligns with the predictions of...
Show moreIn Essay 1, I use cross-country differences in investors’ traits — trust, patience, overconfidence, and risk tolerance — to test the underreaction, overreaction, and uncertain information theories of stock returns. I find that investors’ reactions to large daily stock price shocks vary between lower and higher levels of these traits. Specifically, investors with lower levels of trust and more patience underreact more (or overreact less) to price shocks, which aligns with the predictions of the underreaction hypothesis. Investors with higher levels of overconfidence overreact more to positive price shocks and overreact less to negative price shocks. While this finding does not conform exactly to the predictions of the overreaction hypothesis, it is consistent with more refined theories of how overconfidence affects asset prices. Investors less tolerant of risk overreact less to positive price shocks. I also find that differences in institutional characteristics affect over/underreaction. Specifically, there is less overreaction in countries with stronger investor protections and less insider trading. Additionally, the ability to sell short is associated with more overreaction to negative shocks and less overreaction to positive shocks. In Essay 2, I investigate whether publicly available information (PAI) affects over/underreaction according to predictions of several theoretical models, and then I test if differences in investors’ traits modifies the association between publicly available information and returns. After identifying and correcting for a methodological issue in some prior research, I show that in a pooled international sample of stocks, investors overreact to price shocks not accompanied by information, and also overreact (or react efficiently in some models) to information-based price shocks. I find that the effect of PAI on returns is not the same in each country, which motivates my tests on how this variability relates to differences in investor traits. My results show that investors with higher trust tend to overreact less to shocks accompanied by PAI, while investors less tolerant of risk underreact to positive price shocks. Additionally, investors with higher overconfidence and self-attribution bias overreact more to positive price shocks, but less to negative price shocks, in accordance with behavioral theories.
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Date Issued
2018
PURL
http://purl.flvc.org/fau/fd/FA00013153
Subject Headings
Investors, Securities--Prices, Individual investors--Attitudes
Format
Document (PDF)
ESSAYS ON IMP ACT OF BUYBACKS ON BONDHOLDERS AND LONG-TERM SHAREHOLDERS
Title
ESSAYS ON IMP ACT OF BUYBACKS ON BONDHOLDERS AND LONG-TERM SHAREHOLDERS.
Creator
De Almeida, Pedro Monteiro, Garcia-Feijoo, Luis, Florida Atlantic University, Department of Finance, College of Business
Abstract/Description
This dissertation investigates the consequences of stock repurchase programs on long-term shareholders and bondholders. In the first essay, I present evidence that stock buybacks reduce investment inefficiencies associated with short-term ownership. For a sample of U.S. firms from 1988 to 2018, I first document that stock buybacks are associated with lower and short-term investors with higher corporate investment and net hiring. However, contrary to the conventional view, I find that buybacks...
Show moreThis dissertation investigates the consequences of stock repurchase programs on long-term shareholders and bondholders. In the first essay, I present evidence that stock buybacks reduce investment inefficiencies associated with short-term ownership. For a sample of U.S. firms from 1988 to 2018, I first document that stock buybacks are associated with lower and short-term investors with higher corporate investment and net hiring. However, contrary to the conventional view, I find that buybacks reduce overinvestment related to short-term owners rather than increasing underinvestment. I conclude that firms have been using buybacks as an efficient mechanism to align the interest of short-term and long-term investors. Results are robust to alternative measures of stock repurchase and ownership investment horizon and to endogeneity concern In the second essay, I test the signaling and wealth transfer hypotheses for share repurchase announcements using daily bond and stock returns. I distinguish between governance mechanisms protecting shareholders or bondholders and between internal and external shareholder governance strength. I find that stock and bond returns react positively to buyback announcements only at companies with strong internal shareholder governance mechanisms. Moreover, I reveal the positive impact of internal governance on the relation between stock and bond return is more pronounced in the firms where managerial compensation is more tied to stock performance and where the wealth transfer is expected. I found no evidence that high short-term oriented ownership increases the wealth transfer in repurchase announcements. Finally, I show that bonds with distribution covenants are negatively impacted by repurchase announcements, which supports the view that the market punishes these bonds when firms are likely to use repurchase stocks to bypass their covenants.
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Date Issued
2022
PURL
http://purl.flvc.org/fau/fd/FA00013976
Subject Headings
Stock repurchasing, Bondholders, Stockholders
Format
Document (PDF)
Gender, Connections, and Social Responsibility: Implications for M&A and Compensation
Title
Gender, Connections, and Social Responsibility: Implications for M&A and Compensation.
Creator
Shelton, Austin, Javakhadze, David, Garcia-Feijoo, Luis, Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
In this work I investigate how executive social connections and executive gender diversity dually affect firm Corporate Social Responsibility (CSR), a set of firm policies implemented to benefit the social, economic, and environmental welfare of all stakeholders, and how the changes in CSR driven by executive social connections and executive gender diversity in turn affect a range of corporate policies. This research adds to the social networks, gender, and CSR literature within finance in...
Show moreIn this work I investigate how executive social connections and executive gender diversity dually affect firm Corporate Social Responsibility (CSR), a set of firm policies implemented to benefit the social, economic, and environmental welfare of all stakeholders, and how the changes in CSR driven by executive social connections and executive gender diversity in turn affect a range of corporate policies. This research adds to the social networks, gender, and CSR literature within finance in multiple ways. First, while much past work examines the impact on corporate policy of executive gender or executive social connections in isolation, no major work to date examines the impact of gender dependent executive social connections on corporate policy. Second, this work definitively ties the dual effects of executive gender diversity and social connections to firm CSR. The dual impact of social connections and gender diversity on CSR is shown to affect major corporate policies. In all, this work provides evidence that CSR helps drive important firm polices, including M&A and executive compensation policy, and that CSR is impacted by both a firm’s executive gender diversity and social network connections.
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Date Issued
2019
PURL
http://purl.flvc.org/fau/fd/FA00013262
Subject Headings
Corporate social responsibility, Social responsibility of business, Executives--Social networks, Gender, Mergers and corporate policy, Executive compensation
Format
Document (PDF)
Operating Leverage’s Role in Stock Returns, The Value Premium, and the Profitability Premium: International Evidence
Title
Operating Leverage’s Role in Stock Returns, The Value Premium, and the Profitability Premium: International Evidence.
Creator
Jansen, Benjamin A., Garcia-Feijoo, Luis, Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
This dissertation investigates the association of operating leverage with stock returns, the value premium, and the profitability premium. Results in the first essay support the hypothesis that operating leverage is related to stock returns and the value premium across the sampled countries. Results are robust to cross-country differences, typical controls, multiple definitions of operating and financial leverage, and while controlling for the endogeneity of operating and financial leverage....
Show moreThis dissertation investigates the association of operating leverage with stock returns, the value premium, and the profitability premium. Results in the first essay support the hypothesis that operating leverage is related to stock returns and the value premium across the sampled countries. Results are robust to cross-country differences, typical controls, multiple definitions of operating and financial leverage, and while controlling for the endogeneity of operating and financial leverage. This suggests that the rational explanation for the presence of the value premium lies in the underlying risk exposure of fixed asset risk of operating leverage which is expressed through the value premium. Results further support the hypothesis of strengthening labor protection increasing operating leverage. In turn, increased labor protection marginally negatively associated with the value premium, suggesting that labor protection reduces the value premium through financial leverage. However, because operating and financial leverage are oppositely affected by employment protection, the joint effect of this association may be cumulatively washed out in estimating value premium with employment protection legislation. Results in the second essay further support the hypothesis that operating leverage is related to stock returns and additionally support the hypothesis of operating leverage being associated to the profitability premium. The profit premium tends to be insignificant when generated within operating leverage portfolios, and the profit premium only tends to be significantly positive in the higher operating leverage portfolios. Furthermore, once operating leverage and profitability are orthogonalized from one another, the estimated coefficient of profitability is reduced by a magnitude of roughly 10. These results provide evidence in support of the profit premium being based on the riskiness of the firm through operating leverage, and therefore the profit premium is a rationally priced risk factor in stock returns.
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Date Issued
2018
PURL
http://purl.flvc.org/fau/fd/FA00013074
Subject Headings
Operating leverage., Stocks., Financial leverage., Corporations--Valuation., Labor--Protection.
Format
Document (PDF)
THE IMPACT OF CEO PAST PROFESSIONAL EXPERIENCE AND SOCIAL CAPITAL ON CORPORATE POLICIES AND FIRM PERFORMANCE
Title
THE IMPACT OF CEO PAST PROFESSIONAL EXPERIENCE AND SOCIAL CAPITAL ON CORPORATE POLICIES AND FIRM PERFORMANCE.
Creator
Faulkner, Matthew, Garcia-Feijoo, Luis, Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
Increasing evidence suggests the personal traits of chief executive officers (CEOs) can influence corporate policies. We examine how one dimension, past professional experiences, can affect corporate payout policy. Exploiting exogenous CEO turnovers and future employment, we hypothesize that CEOs experiencing a distress event in their past career alter the corporate payout policy at their subsequent firm of employment. We discover that CEOs having experienced prior professional career...
Show moreIncreasing evidence suggests the personal traits of chief executive officers (CEOs) can influence corporate policies. We examine how one dimension, past professional experiences, can affect corporate payout policy. Exploiting exogenous CEO turnovers and future employment, we hypothesize that CEOs experiencing a distress event in their past career alter the corporate payout policy at their subsequent firm of employment. We discover that CEOs having experienced prior professional career distress are less likely to pay dividends and use repurchases and pay out lower levels for each type of payout. Additionally, when CEOs with distress do have a payout policy greater than zero dollars, there exists a preference toward the use of repurchases in the payout policy, adding to the literature of substitution and differences between the two forms of payout. We find that dividend smoothing is reduced by CEOs that have past professional distress.
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Date Issued
2019
PURL
http://purl.flvc.org/fau/fd/FA00013305
Subject Headings
Chief executive officers, Social capital (Sociology), Experience, Dividends, Payouts
Format
Document (PDF)
Two Essays on An Examination of Life Cycle Effects and Firm Policies
Title
Two Essays on An Examination of Life Cycle Effects and Firm Policies.
Creator
Danso, Charles K. A., Garcia-Feijoo, Luis, Pennathur, Anita K., Florida Atlantic University, College of Business, Department of Finance
Abstract/Description
In Essay 1, I investigate the impact of corporate life cycle dynamics on the observed negative association between asset growth and stock returns in the crosssection. I find that the asset growth effect on average exists across some life cycle stages measured using cohorts. However, controlling for certain variables associated with the theoretical explanations, I find there is no relation between asset growth and returns. I argue this evidence is consistent with an agency-based explanation of...
Show moreIn Essay 1, I investigate the impact of corporate life cycle dynamics on the observed negative association between asset growth and stock returns in the crosssection. I find that the asset growth effect on average exists across some life cycle stages measured using cohorts. However, controlling for certain variables associated with the theoretical explanations, I find there is no relation between asset growth and returns. I argue this evidence is consistent with an agency-based explanation of the asset growth effect. Furthermore, a decomposition of the drivers of the effect shows that different components of assets (i.e. working capital and financing) drive asset growth effect at different life cycle stages. From a decomposition analyses, results show that in the youngest firms (cohort 1), asset growth effect is mostly driven by both operating liability and stock financing on one side (financing) and noncash current assets, PPE, and growth in other assets (for working capital) while cohort 3’s drivers appear to be stock issuances, together with noncash current assets, which I conclude offer further support for agency issues. In Essay 2, I examine how firms’ life cycle affect insider trading behavior, profits surrounding trades, price informativeness, and financing constraints. I argue that if firms’ policies and characteristics change over time as shown in lifecycle literature, then from firm characteristics that motivate insider-trading behavior, one should observe some differences across varying life cycle stages measured using age cohorts. I find that insiders are net sellers at all life cycle stages of a firm. Furthermore, insiders tend to trade more in younger firms than in older firms even though they have fewer numbers of insiders trading. Trading characteristics are generally statistically significant across cohorts. Overall, insiders appear to predict the correct direction for positive wealth generation when trading. Specifically, at all lifecycle stages, they appear to sell before negative CARs, and buy during periods associated with negative CARs that lead to positive CARs days after insider transactions. The findings on price informativeness suggest that in general insider purchases enhance price informativeness for firms at different lifecycle stages, however, this finding holds only for cohort 4 (oldest firms) in the case of insider sales. The implication of this finding is that regulation should be more lax towards purchases as compared to sales for firms, except for sales in firms that are older. Lastly, insider trades are linked with positive investment-cash flow sensitivities for both insider purchases and insider sales, which generally increase monotonically across cohorts. This finding is robust to using GMM approach.
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Date Issued
2018
PURL
http://purl.flvc.org/fau/fd/FA00013057
Subject Headings
Corporations--Growth., Stocks--Rate of return., Insider trading in securities.
Format
Document (PDF)