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- All Subjects: Investment Banking
- All Subjects: Analyst recommendation
- All Subjects: Individual investors
- All Subjects: Investment banking--Law and legislation--United States--History--21st century.
- Creators: Dong, Xiaobo
- Creators: Eghlimi, Sean Cameron
Description
Responding to the allegedly biased research reports issued by large investment banks, the Global Research Analyst Settlement and related regulations went to great lengths to weaken the conflicts of interest faced by investment bank analysts. In this paper, I investigate the effects of these changes on small and large investor confidence and on trading profitability. Specifically, I examine abnormal trading volumes generated by small and large investors in response to security analyst recommendations and the resulting abnormal market returns generated. I find an overall increase in investor confidence in the post-regulation period relative to the pre-regulation period consistent with a reduction in existing conflicts of interest. The change in confidence observed is particularly striking for small traders. I also find that small trader profitability has increased in the post-regulation period relative to the pre-regulation period whereas that for large traders has decreased. These results are consistent with the Securities and Exchange Commission's primary mission to protect small investors and maintain the integrity of the securities markets.
ContributorsDong, Xiaobo (Author) / Mikhail, Michael (Thesis advisor) / Hwang, Yuhchang (Committee member) / Hugon, Artur J (Committee member) / Arizona State University (Publisher)
Created2011
Description
Financial distress and restructuring is a core component of the corporate finance advisor's arsenal and is needed in nearly all market conditions, whether recessionary or expansionary. Financial distress means that a company is in present or future danger of not being able to pay its financial obligations. There are many market indicators of distress which may include: debt trading significantly below face value, stock price trading at or below $1 per share, and implied negative shareholders' equity on the balance sheet. In order to remedy financial distress, the debtor and its creditors seek to hire investment banks specializing in financial restructuring to help fix the debtors's capital structure and possibly navigate through a bankruptcy process. Stephen Moyer describes financial restructuring as "the process of transforming a firm's capital structure to better fit the current and/or future circumstances of the firm" (53). The way that this is accomplished is reducing the debtor's liabilities in order to accurately reflect asset value. Liabilities may be adjusted in out-of-court restructuring agreements or in-court bankruptcy restructurings. The former is often quite difficult considering the hostile nature of the situation and competing interests but is preferred if possible. The latter is most common but also usually both lengthy and expensive. In most cases, the liabilities will be exchanged for new liabilities or equity, providing the creditors with some form of recovery, and leaving the debtor in a healthier position post-emergence. In order to put myself into the shoes of a financial restructuring advisor, I conducted a technical case study on Eastman-Kodak by recreating a financial model depicting possible returns to creditors and emergence from bankruptcy. This model is depicted within the thesis.
ContributorsEghlimi, Sean Cameron (Author) / Licon, Lawrence (Thesis director) / Orpurt, Steven (Committee member) / School of International Letters and Cultures (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2018-12