Matching Items (46)
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- All Subjects: Finance
- Creators: Hertzel, Michael
- Creators: W. P. Carey School of Business
- Resource Type: Text
- Status: Published
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
Mutual monitoring in a well-structured authority system can mitigate the agency problem. I empirically examine whether the number 2 executive in a firm, if given authority, incentive, and channels for communication and influence, is able to monitor and constrain the potentially self-interested CEO. I find strong evidence that: (1) measures of the presence and extent of mutual monitoring from the No. 2 executive are positively related to future firm value (Tobin's Q); (2) the beneficial effect is more pronounced for firms with weaker corporate governance or CEO incentive alignment, with stronger incentives for the No. 2 executives to monitor, and with higher information asymmetry between the boards and the CEOs; (3) such mutual monitoring reduces the CEO's ability to pursue the "quiet life" but has no effect on "empire building;" and (4) mutual monitoring is a substitute for other governance mechanisms. The results suggest that mutual monitoring by a No. 2 executive provides checks and balances on CEO power.
ContributorsLi, Zhichuan (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Bharath, Sreedhar (Committee member) / Babenko, Ilona (Committee member) / Arizona State University (Publisher)
Created2012
Description
This paper investigates the role of top management and board interlocks between acquirers and targets. I hypothesize that an interlock may exacerbate agency problems due to conflicting interests and lead to value-decreasing acquisition. An interlock may also serve as a conduit of information and personal experience, and reduce the cost of information gathering for both firms. I find supporting evidence for these two non-mutually exclusive hypotheses. Consistent with the agency hypothesis, interlocked acquirers underperform non-interlocked acquirers by 2% during the announcement period. However, well-governed acquirers receive higher announcement returns and have better post-acquisition performance in interlocked deals. The proportional surplus accrued to an acquirer is positively correlated with the interlocking agent's ownership in the acquirer relative to her ownership in the target. Consistent with the information hypothesis, when the target's firm value is opaque, interlocks improve acquirer announcement returns and long-term performance. Interlocked acquirers are also more likely to use equity as payment, especially when the acquirer's stock value is opaque. Target announcement returns are not influenced by the existence of interlock. Finally, I find acquisitions are more likely to occur between two interlocked firms and such deals have a higher completion rate.
ContributorsWu, Qingqing (Author) / Bates, Thomas W. (Thesis advisor) / Hertzel, Michael (Committee member) / Lindsey, Laura (Committee member) / Arizona State University (Publisher)
Created2012
Description
The COVID-19 pandemic has and will continue to radically shift the workplace. An increasing percentage of the workforce desires flexible working options and, as such, firms are likely to require less office space going forward. Additionally, the economic downturn caused by the pandemic provides an opportunity for companies to secure favorable rent rates on new lease agreements. This project aims to evaluate and measure Company X’s potential cost savings from terminating current leases and downsizing office space in five selected cities. Along with city-specific real estate market research and forecasts, we employ a four-stage model of Company X’s real estate negotiation process to analyze whether existing lease agreements in these cities should be renewed or terminated.
ContributorsRies, Sarah Cristine (Co-author) / Saker, Logan (Co-author) / Hegardt, Brandon (Co-author) / Patterson, Jack (Co-author) / Simonson, Mark (Thesis director) / Hertzel, Michael (Committee member) / Department of Finance (Contributor, Contributor) / Barrett, The Honors College (Contributor)
Created2021-05
Description
In order to discover if Company X's current system of local trucking is the most efficient and cost-effective way to move freight between sites in the Western U.S., we will compare the current system to varying alternatives to see if there are potential avenues for Company X to create or implement an improved cost saving freight movement system.
ContributorsPicone, David (Co-author) / Krueger, Brandon (Co-author) / Harrison, Sarah (Co-author) / Way, Noah (Co-author) / Simonson, Mark (Thesis director) / Hertzel, Michael (Committee member) / Barrett, The Honors College (Contributor) / Department of Supply Chain Management (Contributor) / Department of Finance (Contributor) / Economics Program in CLAS (Contributor) / School of Accountancy (Contributor) / W. P. Carey School of Business (Contributor) / Sandra Day O'Connor College of Law (Contributor)
Created2015-05
Description
Company X is one of the world's largest semiconductor companies in the world, having a current market capitalization of 177.44 Billion USD, an enterprise value of 173.6 Billion USD, and generated 52.7 billion USD in revenue in fiscal year 2013. Recently, Company X has been looking to expand its Foundry business. The Foundry business in the semiconductor business is the actual process of making the chips. This process can be approached in several different ways by companies who need their chips built. A company, like TSMC, can be considered a pure-play company and only makes chips for other companies. A fabless company, like Apple, creates its own chip design and then allows another company to build them. It also uses other chip designs for its products, but outsources the building to another company. Lastly, the integrated device manufacturing companies like Samsung or Company X both design and build the chip. The foundry industry is a rather novel market for Company X because it owns less than 1 percent of the market. However, the industry itself is rather large, generating a total of 40 billion dollars in revenue annually, with expectations to have increasing year over year growth into the foreseeable future. The industry is fairly concentrated with TSMC being the top competitor, owning roughly 50 percent of the market with Samsung and Global Foundries lagging behind as notable competitors. It is a young industry and there is potential opportunity for companies that want to get into the business. For Company X, it is not only another market to get into, but also an added business segment to supplant their business segments that are forecasted to do poorly in the near future. This thesis will analyze the financial opportunity for Company X in the foundry space. Our final product is a series of P&L's which illustrate our findings. The results of our analysis were presented and defended in front of a panel of Company X managers and executives.
ContributorsJones, Trevor (Author) / Matiski, Matthew (Co-author) / Green, Alex (Co-author) / Simonson, Mark (Thesis director) / Hertzel, Michael (Committee member) / Department of Finance (Contributor) / W. P. Carey School of Business (Contributor) / Barrett, The Honors College (Contributor)
Created2015-05
Description
The purpose of our research was to develop recommendations and/or strategies for Company A's data center group in the context of the server CPU chip industry. We used data collected from the International Data Corporation (IDC) that was provided by our team coaches, and data that is accessible on the internet. As the server CPU industry expands and transitions to cloud computing, Company A's Data Center Group will need to expand their server CPU chip product mix to meet new demands of the cloud industry and to maintain high market share. Company A boasts leading performance with their x86 server chips and 95% market segment share. The cloud industry is dominated by seven companies Company A calls "The Super 7." These seven companies include: Amazon, Google, Microsoft, Facebook, Alibaba, Tencent, and Baidu. In the long run, the growing market share of the Super 7 could give them substantial buying power over Company A, which could lead to discounts and margin compression for Company A's main growth engine. Additionally, in the long-run, the substantial growth of the Super 7 could fuel the development of their own design teams and work towards making their own server chips internally, which would be detrimental to Company A's data center revenue. We first researched the server industry and key terminology relevant to our project. We narrowed our scope by focusing most on the cloud computing aspect of the server industry. We then researched what Company A has already been doing in the context of cloud computing and what they are currently doing to address the problem. Next, using our market analysis, we identified key areas we think Company A's data center group should focus on. Using the information available to us, we developed our strategies and recommendations that we think will help Company A's Data Center Group position themselves well in an extremely fast growing cloud computing industry.
ContributorsJurgenson, Alex (Co-author) / Nguyen, Duy (Co-author) / Kolder, Sean (Co-author) / Wang, Chenxi (Co-author) / Simonson, Mark (Thesis director) / Hertzel, Michael (Committee member) / Department of Finance (Contributor) / Department of Management (Contributor) / Department of Information Systems (Contributor) / School of Mathematical and Statistical Sciences (Contributor) / School of Accountancy (Contributor) / WPC Graduate Programs (Contributor) / Barrett, The Honors College (Contributor)
Created2016-05
Description
This paper explores the history of sovereign debt default in developing economies and attempts to highlight the mistakes and accomplishments toward achieving debt sustainability. In the past century, developing economies have received considerable investment due to higher returns and a degree of disregard for the risks accompanying these investments. As the former Citibank chairman, Walter Wriston articulated, "Countries don't go bust" (This Time is Different, 51). Still, unexpected negative externalities have shattered this idea as the majority of developing economies follow a cyclical pattern of default. As coined by Reinhart and Rogoff, sovereign governments that fall into this continuous cycle have become known as serial defaulters. Most developed markets have not defaulted since World War II, thus escaping this persistent trap. Still, there have been developing economies that have been able to transition out of serial defaulting. These economies are able to leverage debt to compound growth without incurring the protracted consequences of a default. Although the cases are few, we argue that developing markets such as Chile, Mexico, Russia, and Uruguay have been able to escape this vicious cycle. Thus, our research indicates that collaborative debt restructurings coupled with long term economic policies are imperative to transitioning out of debt intolerance and into a sustainable debt position. Successful economies are able to leverage debt to create strong foundational growth rather than gambling with debt in the hopes of achieving rapid catch- up growth.
ContributorsPitt, Ryan (Co-author) / Martinez, Nick (Co-author) / Choueiri, Robert (Co-author) / Goegan, Brian (Thesis director) / Silverman, Daniel (Committee member) / Department of Economics (Contributor) / Department of Information Systems (Contributor) / School of Mathematical and Statistical Sciences (Contributor) / School of Politics and Global Studies (Contributor) / W. P. Carey School of Business (Contributor) / Barrett, The Honors College (Contributor)
Created2015-12
Description
My interest in this topic began last summer when I was fortunate enough to travel to Tomatin, Honduras on a microfinance mission with the organization Global Brigades. Microfinance previously an unknown concept to me, but once I saw the effect it had on the lives of those in need, I was immediately sold on its effectiveness. Microfinance stems from the field of developmental aid. While generally understood as one of the most powerful weapons in the fight against poverty, question as to which methods and techniques are the most effective are still unanswered. It is the goal of my thesis to examine the research in the area of microfinance, reveal the most effective methods, and apply these findings to improve the structure of the Global Brigade microfinance institution in Tomatin.
ContributorsZurek, Joseph William (Author) / Mendez, Jose (Thesis director) / Herbert, Anne (Committee member) / Barrett, The Honors College (Contributor) / Department of Finance (Contributor) / W. P. Carey School of Business (Contributor)
Created2014-05
Description
This paper takes a look at developing a technological start up revolving around the world of health and fitness. The entire process is documented, starting from the ideation phase, and continuing on to product testing and market research. The research done focuses on identifying a target market for a 24/7 fitness service that connects clients with personal trainers. It is a good study on the steps needed in creating a business, and serves as a learning tool for how to bring a product to market.
ContributorsHeck, Kyle (Co-author) / Mitchell, Jake (Co-author) / Korczynski, Brian (Co-author) / Peck, Sidnee (Thesis director) / Eaton, John (Committee member) / Barrett, The Honors College (Contributor) / Department of Finance (Contributor) / Department of Economics (Contributor) / Department of Management (Contributor) / Department of Psychology (Contributor) / Department of Supply Chain Management (Contributor) / School of Accountancy (Contributor) / W. P. Carey School of Business (Contributor)
Created2014-05