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- All Subjects: Finance
- All Subjects: UBRC
- Creators: Sadusky, Brian
- Creators: Tserlukevich, Yuri
- Member of: Theses and Dissertations
- Resource Type: Text
Description
I show that firms' ability to adjust variable capital in response to productivity shocks has important implications for the interpretation of the widely documented investment-cash flow sensitivities. The variable capital adjustment is sufficient for firms to capture small variations in profitability, but when the revision in profitability is relatively large, limited substitutability between the factors of production may call for fixed capital investment. Hence, firms with lower substitutability are more likely to invest in both factors together and have larger sensitivities of fixed capital investment to cash flow. By building a frictionless capital markets model that allows firms to optimize over fixed capital and inventories as substitutable factors, I establish the significance of the substitutability channel in explaining cross-sectional differences in cash flow sensitivities. Moreover, incorporating variable capital into firms' investment decisions helps explain the sharp decrease in cash flow sensitivities over the past decades. Empirical evidence confirms the model's predictions.
ContributorsKim, Kirak (Author) / Bates, Thomas (Thesis advisor) / Babenko, Ilona (Thesis advisor) / Hertzel, Michael (Committee member) / Tserlukevich, Yuri (Committee member) / Arizona State University (Publisher)
Created2013
Description
In the first chapter, I develop a representative agent model in which the purchase of consumption goods must be planned in advance. Volatility in the agent's portfolio increases the risk that a purchase cannot be implemented. This implementation risk causes the agent to make conservative consumption plans. In the model, this leads to persistent and negatively skewed consumption growth and a slow reaction of consumption to wealth shocks. The model proposes a novel explanation for the negative relation between volatility and expected utility. In equilibrium, prices of risky assets must compensate for the utility loss. Hence, the model suggests a new mechanism for generating the equity risk premium. Importantly, because implementation risk does not rely on the co-movement of asset prices with marginal utility, the resulting equity premium does not require concavity of the intratemporal utility function.
In the second chapter, I challenge the view that equity market timing always benefits
shareholders. By distinguishing the effect of a firm's equity decisions from the effect of mispricing itself, I show that market timing can decrease shareholder value. Additionally, the timing of equity sales has a more negative effect on existing shareholders than the timing of share repurchases. My theory can be used to infer firms' maximization objectives from their observed market timing strategies. I argue that the popularity of stock buybacks, the low frequency of seasoned equity offerings, and the observed post-event stock returns are consistent with managers maximizing current shareholder value.
In the second chapter, I challenge the view that equity market timing always benefits
shareholders. By distinguishing the effect of a firm's equity decisions from the effect of mispricing itself, I show that market timing can decrease shareholder value. Additionally, the timing of equity sales has a more negative effect on existing shareholders than the timing of share repurchases. My theory can be used to infer firms' maximization objectives from their observed market timing strategies. I argue that the popularity of stock buybacks, the low frequency of seasoned equity offerings, and the observed post-event stock returns are consistent with managers maximizing current shareholder value.
ContributorsWan, Pengcheng (Author) / Boguth, Oliver (Thesis advisor) / Tserlukevich, Yuri (Thesis advisor) / Babenka, Ilona (Committee member) / Arizona State University (Publisher)
Created2015
Description
By matching a CEO's place of residence in his or her formative years with U.S. Census survey data, I obtain an estimate of the CEO's family wealth and study the link between the CEO's endowed social status and firm performance. I find that, on average, CEOs born into poor families outperform those born into wealthy families, as measured by a variety of proxies for firm performance. There is no evidence of higher risk-taking by the CEOs from low social status backgrounds. Further, CEOs from less privileged families perform better in firms with high R&D spending but they underperform CEOs from wealthy families when firms operate in a more uncertain environment. Taken together, my results show that endowed family wealth of a CEO is useful in identifying his or her managerial ability.
ContributorsDu, Fangfang (Author) / Babenko, Ilona (Thesis advisor) / Bates, Thomas (Thesis advisor) / Tserlukevich, Yuri (Committee member) / Wang, Jessie (Committee member) / Arizona State University (Publisher)
Created2018
Description
Financial Intelligence Pays Off blog is an easy to use blog for high school juniors and seniors and college students to access in order to receive a quick overview of essential financial topics. There are many sources and college courses for students to take to get a more in-depth understanding of topics such as saving, filing taxes, learning about credit but many times students do not know about these courses. However, it is often that courses are restricted to students who are business majors and online sources sometimes use to technical of terminology for young adults to follow along. The goal of this blog is for it to give students just a quick overview of what taxes are, how to manage and have a good credit score, how to keep a budget and other essential financial tasks. There are five topics covered in the blog as well as resources for students to access if they would like more information on a topic.
ContributorsFavata, Danielle (Co-author) / Perez-Vargas, Sofia (Co-author) / Sadusky, Brian (Thesis director) / Hoffman, David (Committee member) / WPC Graduate Programs (Contributor) / School of Accountancy (Contributor) / Department of Information Systems (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2018-12
Description
Dodd-Frank should be celebrated for its success in stabilizing the financial sector following the last financial crisis. Some of its measures have not only contained financial disaster but contributed to economic growth. These elements of Dodd-Frank have been identified as "clear wins" and include the increase of financial institutions' capital requirements, the single-point-of-entry approach to regulating financial firms, and the creation of the Consumer Financial Protection Bureau (CFPB). The single-point-of-entry strategy (SPOE), specifically, has done much to bring an end to the age of "too big to fail" institutions. By identifying firms that could expect to be aided in case of financial crisis, the SPOE approach reduces uncertainty among financial institutions. Moreover, SPOE eliminates the significant source of risk by establishing clear protocols for resolving failed financial firms. Dodd-Frank has also taken measures to better protect consumers with the creation of the CFPB. Some of the CFPB's stabilizing actions have included the removal of deceptive financial products, setting guidelines for qualified mortgages, and other regulatory safeguards on money transfers. Despite the CFPB's many triumphs, however, there is room for improvement, especially in the agency's ability to reduce regulatory redundancies in supervision and collaboration with other financial sector controllers. The significant strengths of Dodd-Frank are evident in its elements that have secured financial stability. However, it is important to also consider any potential to stifle healthy economic growth. There are several areas for legislative amendments and reforms in order to improve the performance of Dodd-Frank given its sweeping regulatory impact. Several governing redundancies now exist with the creation of new regulatory authorities. Special efforts to increase the authority of the Financial Sector Oversight Council (FSOC) and preserving the impartiality of the Office of Financial Research (OFR) are specific examples of reforms still needed to elevate the effectiveness of Dodd-Frank. In addition, Dodd-Frank could do more to clarify the Volcker Rule in order to ease banks' burden to comply with excessive oversight. Going forward, policymakers must be willing to adjust parts of Dodd-Frank that encroach too far on the private sector's ability to foster efficiency or development. In addition, identifying and monitoring areas of the legislation deemed "too soon to tell" will provide insight on the accuracy and benefit of some Dodd-Frank measures.
ContributorsConrad, Cody Lee (Author) / Sadusky, Brian (Thesis director) / Hoffman, David (Committee member) / School of Politics and Global Studies (Contributor) / Department of Management and Entrepreneurship (Contributor) / Barrett, The Honors College (Contributor)
Created2018-05
Description
This dissertation consists of two essays on corporate policy. The first chapter analyzes whether being labeled a “growth” firm or a “value” firm affects the firm’s dividend policy. I focus on the dividend policy because of its discretionary nature and the link to investor demand. To address endogeneity concerns, I use regression discontinuity design around the threshold to assign firms to each category. The results show that “value” firms have a significantly higher dividend payout - about four percentage points - than growth firms. This approach establishes a causal link between firm “growth/value” labels and dividend policy.
The second chapter develops investment policy model which associated with du- ration of cash flow. Firms are doing their business by operating a portfolio of projects that have various duration, and the duration of the project portfolio generates dif- ferent duration of cash flow stream. By assuming the duration of cash flow as a firm specific characteristic, this paper analyzes how the duration of cash flow affects firms’ investment decision. I develop a model of investment, external finance, and savings to characterize how firms’ decision is affected by the duration of cash flow. Firms maximize total value of cash flow, while they have to maintain their solvency by paying a fixed cost for the operation. I empirically confirm the positive correlation between duration of cash flow and investment with theoretical support. Financial constraint suffocates the firm when they face solvency issue, so that model with financial constraint shows that the correlation between duration of cash flow and investment is stronger than low financial constraint case.
The second chapter develops investment policy model which associated with du- ration of cash flow. Firms are doing their business by operating a portfolio of projects that have various duration, and the duration of the project portfolio generates dif- ferent duration of cash flow stream. By assuming the duration of cash flow as a firm specific characteristic, this paper analyzes how the duration of cash flow affects firms’ investment decision. I develop a model of investment, external finance, and savings to characterize how firms’ decision is affected by the duration of cash flow. Firms maximize total value of cash flow, while they have to maintain their solvency by paying a fixed cost for the operation. I empirically confirm the positive correlation between duration of cash flow and investment with theoretical support. Financial constraint suffocates the firm when they face solvency issue, so that model with financial constraint shows that the correlation between duration of cash flow and investment is stronger than low financial constraint case.
ContributorsLee, Tae Eui (Author) / Mehra, Rajnish (Thesis advisor) / Tserlukevich, Yuri (Thesis advisor) / Custodio, Claudia (Committee member) / Arizona State University (Publisher)
Created2015
Description
This paper examines the link between firm size and innovation. Given that innovation is highly reliant on human capital, the ability to attract, motivate, and retain high quality inventors is a key determinant of firm innovation. Firm size may affect these abilities, and small firms are known to account for a disproportionate share of aggregate innovation. I therefore investigate the role that sorting of inventors across firms plays in explaining this disparity. Talented inventors may find employment at a large firm less attractive due to the relative absence of growth options and a lower ability to link compensation to performance. Using inventor-level patent data, I construct employment histories for inventors at U.S. public firms. I find that the most productive inventors are disproportionately likely to move to small firms, while the least productive inventors disproportionately remain at large firms. These results cannot be explained fully by small firms' superior growth opportunities. In addition, productive innovators' turnover in small firms is sensitive to the level of option compensation. Taken together, this evidence is consistent with inventor sorting explaining part of the firm size innovation gap.
ContributorsChi, Yung-Ling (Author) / Lindsey, Laura A. (Thesis advisor) / Tserlukevich, Yuri (Committee member) / Stein, Luke C.D. (Committee member) / Arizona State University (Publisher)
Created2016
Description
I study the relation between firm debt structure and future external financing and investment. I find that greater reliance on long-term debt is associated with increased access to external financing and ability to undertake profitable investments. This contrasts with previous empirical results and theoretical predictions from the agency cost literature, but it is consistent with predictions regarding rollover risk. Furthermore, I find that firms with lower total debt (high debt capacity) have greater access to new financing and investment. Lower leverage increases future debt issues and capital expenditures, and firms do not fully rebalance by reducing the use of external financing sources such as equity. Finally, my results support the view that greater reliance on unsecured debt can increase future debt financing. Overall, my paper offers new insights into how aspects of debt structure, in particular maturity, are related ex-post to firms' ability to raise new financing and invest.
ContributorsFlynn, Sean Joseph (Author) / Tserlukevich, Yuri (Thesis advisor) / Hertzel, Mike (Committee member) / Stein, Luke (Committee member) / Arizona State University (Publisher)
Created2017
Description
The current state of financial inequality in America is showing multiple economic and social problems that harm the American dream and legacy. It is found that increasing inequality causes slower GDP growth, underinvestment in human capital, and disproportionate shifting of political power to the rich. Researches show that Average Americans do not realize how severe inequality has gotten over the past few decades, but one thing is clear: What they thought as ideal distribution of wealth is nowhere close to the reality. In this thesis, I examine the current state of inequality and how it has changed since the 1980s. Then, I present reasons why inequality has been on an increasing trend and identify what economic policies lead to rising inequality. With analysis of Reaganomics (trickle-down economics), I make an argument that reducing taxes on the rich might provide a short-term boost in the national economy, but such policy soon encounters side effects and is unsustainable. Fighting inequality is an imperative step to boost the American middle class and maintain sustainable and stable economic growth. In order to relieve inequality down closer to what Americans picked as the appropriate level, I present two recommendations that can be effective in fighting inequality. One is to reform the tax policies to make it more progressive especially towards the top 5% and shift the tax burden from the bottom to the top, while implementing stricter regulations regarding tax evasion. Next is to provide disadvantaged students with better access to higher education by subsidizing public universities more and lowering FAFSA rate. Realizing one's earning potential starts with education, and higher education today is more important than any other time in the past. Once these solutions prove effective and inequality is relieved, America will be able to regain her reputation as land of opportunity and enjoy faster economic growth.
ContributorsOh, Jae Yoon (Author) / Hoffman, David (Thesis director) / Sadusky, Brian (Committee member) / Yim, Roy (Committee member) / Department of Finance (Contributor) / School of Geographical Sciences and Urban Planning (Contributor) / Barrett, The Honors College (Contributor)
Created2015-12
Description
This thesis will be exploring the situation of one of the most vulnerable groups during the COVID-19 pandemic, low-income renters. As businesses and whole states were shutdown, jobs and wages were lost and the over 100 million renters in the United States, many of whom spend a significant chunk of their income on their rent, were forced into a precarious situation. <br/><br/>The Federal Rent Moratorium that is currently in effect bars any evictions for missed rent payments, but these are expenses that if left unpaid, are just continuously accruing. These large sums of rent payments are currently scheduled to be dropped on struggling individuals at the end of the recently extended date of June 30th, 2021. As these renters are unable to pay for their housing, landlords lose the revenue streams from their investment properties, and are in turn unable to cover the debt service on the financing they utilized to acquire the property. In turn, financial institutions can then face widespread defaults on these loans.<br/><br/>The rental property market is massive, as roughly 34% of the American population consist of renters. If left unaddressed, this situation has the potential to cause cataclysmal consequences on the economy, including mass homelessness and foreclosures of rental properties and complexes. Everyone, from the tenants to the bankers and beyond, are stakeholders in this dire situation and this paper will seek to explore the issues, desires, and potential solutions applicable to all parties involved. Beginning with the pre-pandemic outlook of the rental housing market, then examining the impact of the coronavirus and the resulting federal actions, to finally explore solutions that may prevent or mitigate this potential disaster.
ContributorsMorris, Michael H (Author) / Sadusky, Brian (Thesis director) / Licon, Wendell (Committee member) / Historical, Philosophical & Religious Studies (Contributor) / Historical, Philosophical & Religious Studies, Sch (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2021-05