Matching Items (210)
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
I examine the determinants and implications of the level of director monitoring. I use the distance between directors' domiciles and firm headquarters as a proxy for the level of monitoring and the introduction of a new airline route between director domicile and firm HQ as an exogenous shock to the level of monitoring. I find a strong relation between distance and both board meeting attendance and director membership on strategic versus monitoring committees. Increased monitoring, as measured by a reduction in effective distance, by way of addition of a direct flight, is associated with a 3% reduction in firm value. A reduction in effective distance is also associated with less risk-taking, lower stock return volatility, lower accounting return volatility, lower R&D; spending, fewer acquisitions, and fewer patents.
ContributorsBennett, Benjamin (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Babenka, Ilona (Committee member) / Custodio, Claudia (Committee member) / Arizona State University (Publisher)
Created2014
Description
This study investigates the impact of portfolio disclosure on hedge fund performance. Using a regression discontinuity design, I investigate the effect of the disclosure requirements that take effect when an investment company's assets exceed $100 million; when that occurs, a fund is required by the SEC to submit form 13F disclosing its portfolio holdings. Consistent with the argument that portfolio disclosure reveals "trade secrets" and also raises front running costs thus harms the funds that disclose, I find that there is a drop in fund performance (about 4% annually) after a fund begins filing form 13F, as well as an increase in return correlations with other hedge funds in the same investment style. The drop in performance cannot be explained by a change in the assets under management or a mean reversion in returns. Consistent with the idea that funds with illiquid holdings tend to employ sequential trading strategies, which increase the likelihood of being taken advantage of by free riders and front runners, the drop in performance is more dramatic for funds that have more illiquid holdings. In addition, I find that the incentive fees paid to fund managers are 1% higher when portfolio disclosure is required, which supports the hypothesis that investors' monitoring of portfolio holdings disciplines adverse risk-taking by fund managers and allows for higher convexity in the optimal compensation structure. Finally, there is a drop in flows into funds that file 13F, which suggests that hedge fund investors negatively value 13F disclosure. Overall, this study suggests that the cost of portfolio disclosure is economically large. It contributes to the policy debate over what constitutes optimal disclosure.
ContributorsShi, Zhen (Author) / Hertzel, Michael (Thesis advisor) / Aragon, Georges (Thesis advisor) / Coles, Jeffrey (Committee member) / Arizona State University (Publisher)
Created2011
Description
This dissertation analyzes the reliability of reported employee stock option (ESO) expense, the determination of expected life of ESOs, motivations to manipulate ESO expense, and the impact of noise in ESO expense on subsequent stock price returns. Based on unique data, this is the first paper to measure average historical ESO life for all employees of a broad set of firms. I find average life has a mean of 4.12 years. Average life is reduced by 0.38 years per 10 percentage point increase in volatility, and industry effects explain an additional 7% of the variation. Reported expected life increases 0.37 years per year of historical life and an additional 0.16 years per year of age of the outstanding options. Deviations of reported volatility and life from benchmarks have positive correlations with deviations from own reporting history. Using stated assumptions rather than benchmark assumptions drops (increases) ESO expense by 8.3% (17.6%) for the 25th (75th) percentile firm. The change in earnings per share decreases (increases) by $0.019 ($0.007) for the 25th (75th) percentile firm. Tests for motivations to manipulate stock option expense downward have mixed results. Absolute values of deviations from benchmarks have a positive relationship with subsequent stock price volatility suggesting noise in reported stock option expense results in stock price noise. Deviations from benchmarks and subsequent cumulative abnormal returns have statistically significant results but are difficult to interpret.
ContributorsYoung, Brian (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Babenko, Ilona (Committee member) / Arizona State University (Publisher)
Created2011
Description
In this dissertation, I examine the source of some of the anomalous capital market outcomes that have been documented for firms with high accruals. Chapter 2 develops and implements a methodology that decomposes a firm's discretionary accruals into a firm-specific and an industry-specific component. I use this decomposition to investigate which component drives the subsequent negative returns associated with firms with high discretionary accruals. My results suggest that these abnormal returns are driven by the firm-specific component of discretionary accruals. Moreover, although industry-specific discretionary accruals do not directly contribute towards this anomaly, I find that it is precisely when industry-specific discretionary accruals are high that firms with high firm-specific discretionary accruals subsequently earn these negative returns. While consistent with irrational mispricing or a rational risk premium associated with high discretionary accruals, these findings also support a transactions-cost based explanation for the accruals anomaly whereby search costs associated with distinguishing between value-relevant and manipulative discretionary accruals can induce investors to overlook potential earnings manipulation. Chapter 3 extends the decomposition to examine the role of firm-specific and industry-specific discretionary accruals in explaining the subsequent market underperformance and negative analysts' forecast errors documented for firms issuing equity. I examine the post-issue market returns and analysts' forecast errors for a sample of seasoned equity issues between 1975 and 2004 and find that offering-year firm-specific discretionary accruals can partially explain these anomalous capital market outcomes. Nonetheless, I find this predictive power of firm-specific accruals to be more pronounced for issues that occur during 1975 - 1989 compared to issues taking place between 1990 and 2004. Additionally, I find no evidence that investors and analysts are more overoptimistic about the prospects of issuers that have both high firm-specific and industry-specific discretionary accruals (compared to firms with high discretionary accruals in general). The results indicate no role for industry-specific discretionary accruals in explaining overoptimistic expectations from seasoned equity issues and suggest the importance of firm-specific factors in inducing earnings manipulation surrounding equity issues.
ContributorsIkram, Atif (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Tserlukevich, Yuri (Committee member) / Arizona State University (Publisher)
Created2011
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 focus of human decomposition studies has traditionally been on how external factors affect the decomposition of a body. There is much less literature on how the decomposition of a human cadaver affects its local ecosystem. This study attempts to address the knowledge gap in current literature regarding how the decomposition of human cadavers affects the bioavailability of essential plant nutrients (P, K, Ca, Fe, C and N) as well as toxins (As and Pb) in soil. By studying the bioavailability of plant nutrients, especially nitrogen, and toxins, this research hopes to inform new technologies and techniques for locating clandestine gravesites. The objectives of this study were twofold: 1) determine whether soils exposed to cadaveric decomposition can be visually distinguished from one another via macroscopic and microscopic observation and 2) observe general changes in nutrient and toxic element bioavailability and changes in carbon and nitrogen isotope ratios over time as well as spatially across a body. Visual analyses of soil samples, both macro- and microscopically did not show potential in distinguishing soil exposed to cadaver decomposition from unexposed soil. Relative bioavailability as well as overall bioavailable concentrations of both plant nutrients and toxins were highly elevated after 12 months. Toxins, such as As and Pb, tended to have greater bioavailable concentrations at the near-torso positions, though no consistent spatial trends between nutrient bioavailable concentrations were observed between the three individuals. Nitrogen concentrations and nitrogen isotope (δ15N) ratios show strong potential as markers of clandestine graves throughout the study period. While this research demonstrates further need to uncover what factors influence bioavailability of elements in gravesoil, it shows that the bioavailability of plant nutrients and toxins as well as δ15N ratios are greatly affected by cadaver decomposition, and emerging technologies in gravesite detection based on plant or soil changes have a solid foundation.
ContributorsAnderson, Sara Rae (Author) / Kobojek, Kimberly (Thesis director) / Gordon, Gwyneth (Committee member) / School of Mathematical and Natural Sciences (Contributor) / Barrett, The Honors College (Contributor)
Created2018-05
Description
Criminal Justice is a complex subject matter, and not everyone agrees on the way a criminal justice system ought to function. But one feature that is common to virtually all forms of proposed justice systems is that a true justice system treats people ethically. The question, then, is how a justice system can achieve this. This investigation analyzed two ethical theories, Kantianism and Utilitarianism, to determine which one would be better suited for guiding a criminal justice system on how to treat the people involved ethically. This investigation focused on applying the two theories to the U.S. Criminal Justice System in particular.
Kantianism is a duty-based moral theory in which actions have an intrinsic moral worth. This means certain actions are morally right and other are morally wrong, regardless of the intended or realized consequences. The theory relies on the categorical imperative to judge the morality of certain actions. It states that an action is moral if its maxim can be willed universal law and if it avoids treating people as merely a means. In contrast, Utilitarianism is a consequentialist theory which focuses on the consequences of an action in judging moral worth. In Utilitarianism, the morally correct action is the one which will maximize utility; that is to say, the morally right action is the one which will produce the greatest amount of happiness and minimize the amount of pain for the greatest number of people.
After applying these two theories to moral dilemmas facing the U.S. Criminal Justice System, including the appropriate collection of DNA evidence, the use of police deception, and the use of criminal punishments such as solitary confinement or the death penalty, it was clear that Kantianism was the ethical theory best suited for guiding the system in treating people ethically. This is because Kantianism’s focus on the intrinsic moral worth of an action rather than its consequences leaves less room for ambiguity than does Utilitarianism.
Kantianism is a duty-based moral theory in which actions have an intrinsic moral worth. This means certain actions are morally right and other are morally wrong, regardless of the intended or realized consequences. The theory relies on the categorical imperative to judge the morality of certain actions. It states that an action is moral if its maxim can be willed universal law and if it avoids treating people as merely a means. In contrast, Utilitarianism is a consequentialist theory which focuses on the consequences of an action in judging moral worth. In Utilitarianism, the morally correct action is the one which will maximize utility; that is to say, the morally right action is the one which will produce the greatest amount of happiness and minimize the amount of pain for the greatest number of people.
After applying these two theories to moral dilemmas facing the U.S. Criminal Justice System, including the appropriate collection of DNA evidence, the use of police deception, and the use of criminal punishments such as solitary confinement or the death penalty, it was clear that Kantianism was the ethical theory best suited for guiding the system in treating people ethically. This is because Kantianism’s focus on the intrinsic moral worth of an action rather than its consequences leaves less room for ambiguity than does Utilitarianism.
ContributorsMorett, Xavier Laakea (Author) / Manninen, Bertha (Thesis director) / Kimberly, Kobojek (Committee member) / School of Criminology and Criminal Justice (Contributor) / School of Mathematical and Natural Sciences (Contributor) / Barrett, The Honors College (Contributor)
Created2020-05
Description
Calcium is the only ion capable of triggering electrical and chemical reactions in cells which are part of essential biomolecular processes, such as gene transcription and ion flux. Calcium homeostasis, the control of concentration levels, is therefore crucial for the proper functioning of cells. For example, cardiomyocytes, the cells that form cardiac muscle, rely on calcium transfer process to produce muscle contraction.
The purpose of this work is to study aspects of calcium homeostasis in the model organism Saccharomyces cerevisiae, common yeast. Using luminometric techniques, the response of the yeast was monitored against a set of changes in the environment calcium abundance. The results indicate a complex response as both increase and decreases of external calcium induce elevations in cytosolic calcium concentrations.
Calcium is transferred across compartments by means of channels. In Saccharomyces cerevisiae, many of them have been identified; Cch1p-Mid1p, Vcx1p, Pmc1p, Pmr1p, and Yvc1p. Their participation in calcium homeostasis is well established. Observations of cytosolic calcium increase after a hypertonic shock are mainly associated with influx of ions from the environment though the Cch1p-Mid1p. This process is generally considered as driven by calcium concentration gradients. However, recent studies have suggested that the plasma membrane channel, Cch1p-Mid1p, may possess more sophisticated regulation and sensory mechanisms. The results of our experiments support these ideas.
We carried out experiments that subjected yeast to multiple shocks: a hypertonic shock followed by either a second hypertonic shock, a hypotonic shock, or a yeast dilution pulse where the solution volume increases by the calcium concentration has only a small change. The cytosolic calcium concentration of a yeast population was monitored via luminometry.
The main result of this study is the observation of an unexpected response to the combination of hypertonic and hypotonic shocks. In this case it was observed that the cytosolic calcium concentration increased after both shocks. This indicates that cytosolic calcium increases are not solely driven by the presence of concentration gradients. The response after the hypotonic pulse arises from more complex mechanisms that may include sensor activity at the membrane channels and the release of calcium from internal storages.
The purpose of this work is to study aspects of calcium homeostasis in the model organism Saccharomyces cerevisiae, common yeast. Using luminometric techniques, the response of the yeast was monitored against a set of changes in the environment calcium abundance. The results indicate a complex response as both increase and decreases of external calcium induce elevations in cytosolic calcium concentrations.
Calcium is transferred across compartments by means of channels. In Saccharomyces cerevisiae, many of them have been identified; Cch1p-Mid1p, Vcx1p, Pmc1p, Pmr1p, and Yvc1p. Their participation in calcium homeostasis is well established. Observations of cytosolic calcium increase after a hypertonic shock are mainly associated with influx of ions from the environment though the Cch1p-Mid1p. This process is generally considered as driven by calcium concentration gradients. However, recent studies have suggested that the plasma membrane channel, Cch1p-Mid1p, may possess more sophisticated regulation and sensory mechanisms. The results of our experiments support these ideas.
We carried out experiments that subjected yeast to multiple shocks: a hypertonic shock followed by either a second hypertonic shock, a hypotonic shock, or a yeast dilution pulse where the solution volume increases by the calcium concentration has only a small change. The cytosolic calcium concentration of a yeast population was monitored via luminometry.
The main result of this study is the observation of an unexpected response to the combination of hypertonic and hypotonic shocks. In this case it was observed that the cytosolic calcium concentration increased after both shocks. This indicates that cytosolic calcium increases are not solely driven by the presence of concentration gradients. The response after the hypotonic pulse arises from more complex mechanisms that may include sensor activity at the membrane channels and the release of calcium from internal storages.
ContributorsMintz, David Anthony (Co-author) / Parker, Augustus (Co-author) / Solis, Francisco (Thesis director) / Marshall, Pamela (Committee member) / School of Mathematical and Natural Sciences (Contributor, Contributor) / Barrett, The Honors College (Contributor)
Created2020-05