Three essays on the interrelationships among financial restatements, corporate governance, market microstructure and the firm's rate of return

The increase in the number of financial restatements in recent years has resulted in a significant decrease in the amount of market capitalization for restated companies. Prior literature did not differentiate between single and multiple restatements announcements. This research investigated the inter-relationships among multiple financial restatements, corporate governance, market microstructure and the firm’s rate of return in the form of three essays by differentiating between single and multiple restatement announcement companies. First essay examined the stock performance of companies announcing the financial restatement multiple times. The postulation is that prior research overestimates the abnormal return by not separating single restatement companies from multiple restatement companies. This study investigated how market penalizes the companies that announce restatement more than once. Differentiating the restatement announcement data based on number of restatement announcements, the results supported the non persistence hypothesis that the market has no memory and negative abnormal returns obtained after each of the restatement announcements are completely random. Second essay examined the multiple restatement announcements and its perceived resultant information asymmetry around the announcement day. This study examined the pattern of information asymmetry for these announcements in terms of whether the bid-ask spread widens around the announcement day. The empirical analysis supported the hypotheses that the spread does widen not only around the first restatement announcement day but around every subsequent announcement days as well. The third essay empirically examined the financial and corporate governance characteristics of single and multiple restatement announcements companies. The analysis showed that corporate governance variables influence the occurrence of multiple restatement announcements and can distinguish multiple restatements announcement companies from single restatement announcement companies.

Three Essays on the Interrelationships Among Financial Restatements, Corporate Governance, Market Microstructure and the Firm's Rate of Return

The increase in the number of financial restatements in recent years has resulted in a significant decrease in the amount of market capitalization for restated companies. Prior literature does not differentiate between single and multiple restatements announcements. This research investigates the inter-relationships among multiple financial restatements, corporate governance, market microstructure and the firm's rate of return in the form of three essays by differentiating between single and multiple restatement announcement companies. First essay examines the stock performance of companies announcing the financial restatement multiple times. The postulation is that prior research overestimates the abnormal return by not separating single restatement companies from multiple restatement companies. This study investigates how market penalizes the companies that announce restatement more than once. Differentiating the restatement announcement data based on number of restatement announcements, the results support for non persistence hypothesis that the market has no memory and negative abnormal returns obtained after each of the restatement announcements are completely random. Second essay examines the multiple restatement announcements and its perceived resultant information asymmetry around the announcement day. This study examines the pattern of information asymmetry for these announcements in terms of whether the bid-ask spread widens around the announcement day. The empirical analysis supports the hypotheses that the spread does widen not only around the first restatement announcement day but around every subsequent announcement days as well. The third essay empirically examines the financial and corporate governance characteristics of single and multiple restatement announcements companies. The analysis shows that corporate governance variables influence the occurrence of multiple restatement announcements and can distinguish multiple restatements announcement companies from single restatement announcement companies.

Audit committee director turnover

Actions by both private sector organizations and legislators in recent years have highlighted the importance of the audit committee of the board of directors of corporations in the financial reporting process. For example, the Sarbanes Oxley Act of 2002 has multiple sections that deal with the composition and functioning of audit committees. My dissertation examines multiple issues related to the composition of audit committees. In the first two parts of my dissertation, I examine the stock market reactions to disclosures of audit committee appointments and departures in the 8-Ks filed with the SEC during 2008 and 2009. I find that there is a positive stock market reaction to the appointment of audit committee directors who are financial experts. The second essay investigates the cumulative abnormal return to departure of audit committee directors. I find that when an accounting expert leaves the audit committee, the market reaction is significantly negative. These results are consistent with regulators’ concerns related to having directors with audit, accounting and other financial expertise on corporate audit committees. The third essay of my dissertation examines the changes in audit committee composition in the last decade. I find that while the increase in audit committee size is relatively modest, there has been a significant increase in the number of audit committee experts and the frequency of audit committee meetings over the past decade; interestingly, such increase in the number of meetings has persisted even after the media focus on the auditing profession, in the immediate aftermath of the Enron and Andersen failures, have waned. My results show that audit committee composition and its role continues to evolve with regulatory and other corporate governance related changes.

International stock portfolio selection and performance measures recognizing higher moments of return distributions

Since the seminal works of Markowitz (1952), Sharpe (1964), and Lintner (1965), numerous studies on portfolio selection and performance measure have been based upon the mean-variance framework. However, several researchers (e.g., Arditti (1967, and 1971), Samuelson (1970), and Rubinstein (1973)) argue that the higher moments cannot be neglected unless there is reason to believe that: (i) the asset returns are normally distributed and the investor's utility function is quadratic, or (ii) the empirical evidence demonstrates that higher moments are irrelevant to the investor's decision. Based on the same argument, this dissertation investigates the impact of higher moments of return distributions on three issues concerning the 14 international stock markets.^ First, the portfolio selection with skewness is determined using: the Polynomial Goal Programming in which investor preferences for skewness can be incorporated. The empirical findings suggest that the return distributions of international stock markets are not normally distributed, and that the incorporation of skewness into an investor's portfolio decision causes a major change in the construction of his optimal portfolio. The evidence also indicates that an investor will trade expected return of the portfolio for skewness. Moreover, when short sales are allowed, investors are better off as they attain higher expected return and skewness simultaneously.^ Second, the performance of international stock markets are evaluated using two types of performance measures: (i) the two-moment performance measures of Sharpe (1966), and Treynor (1965), and (ii) the higher-moment performance measures of Prakash and Bear (1986), and Stephens and Proffitt (1991). The empirical evidence indicates that higher moments of return distributions are significant and relevant to the investor's decision. Thus, the higher moment performance measures should be more appropriate to evaluate the performances of international stock markets. The evidence also indicates that various measures provide a vastly different performance ranking of the markets, albeit in the same direction.^ Finally, the inter-temporal stability of the international stock markets is investigated using the Parhizgari and Prakash (1989) algorithm for the Sen and Puri (1968) test which accounts for non-normality of return distributions. The empirical finding indicates that there is strong evidence to support the stability in international stock market movements. However, when the Anderson test which assumes normality of return distributions is employed, the stability in the correlation structure is rejected. This suggests that the non-normality of the return distribution is an important factor that cannot be ignored in the investigation of inter-temporal stability of international stock markets. ^

Factors that motivate RNs to return to school for the BSN and to remain in school to complete the degree

This exploratory descriptive study examined the factors that influence Registered Nurses (RNs) to return to school to pursue a Baccalaureate of Science in Nursing degree (BSN) and the factors that contribute to the decision to remain in school to complete the degree. Students (N = 226) enrolled in RN-BSN programs in three different universities in southeast Florida participated in the study by completing researcher developed questionnaires. The study group included 140 students who were newly enrolled in an RN-BSN program and 86 students who were preparing to graduate from an RN-BSN program. The instruments used in this study were two researcher developed questionnaires, the Corbett Nursing Educational Motivational Inventory - Form A (CNEMI-A), administered to the newly enrolled students, and the Corbett Nursing Educational Motivational Inventory - Form B (CNEMI-B), administered to the graduating students. The questionnaires included researcher-developed items in addition to items derived from a modified form of the Educational Participation Scale used by other researchers. Demographic data were also collected. Findings indicated that changes in health care, career goals, personal satisfaction, and flexible curriculum patterns are the major reasons why RNs return to school for the BSN. Less significant factors were social support, salary increase, and employer expectations. The factors considered most significant in the decision to remain in school to complete the degree were ranked in the following order: personal achievement, changes in health care, career change/advancement, enrollment options, faculty support, social support, and employer support. Implications for nurse educators related to the changing roles of RNs and the need to continue to assist RNs to adapt to new roles in health care. Recommendations for future research on RN-BSN nursing education included studies to identify the courses considered most useful by RN-BSN students as compared to courses considered repetitive of basic nursing programs. Studies were also recommended to examine the differences between the needs of RNs related to experience as an RN and recency of education. Additional studies were recommended to determine the feasibility of dual-enrollment ADN/BSN programs for last semester ADN students. ^

Estimation of global systematic risk for securities listed in multiple markets

The market model is the most frequently estimated model in financial economics and has proven extremely useful in the estimation of systematic risk. In this era of rapid globalization of financial markets there has been a substantial increase in cross listings of stocks in foreign and regional capital markets. As many as a third to a half of the stocks in some major exchanges are foreign listed. The multiple listings of stocks has major implications for the estimation of systematic risk. The traditiona1 method of estimating the market model by using data from only one market will lead to misleading estimates of beta. This study demonstrates that the estimator for systematic risk and the methodology itself changes when stocks are listed in multiple markets. General expressions are developed to obtain the estimator of global beta under a variety of assumptions about the error terms of the market models for different capital markets. The assumptions pertain both to the volatilities of the abnormal returns in each market, and to the relationship between the markets. ^ Explicit expressions are derived for the estimation of global systematic risk beta when the returns are homoscedastic and also under different heteroscedastic conditions both within and/or between markets. These results for the estimation of global beta are further extended when return generating process follows an autoregressive scheme.^

Education, earnings, and rates of return: The case of Taiwan

Educational planners and economists have long recognized the importance of education as a form of productive investment in both advanced countries and developing countries. In the case of Taiwan, along with impressive economic growth, there was an even faster rate of growth of the government's investment in education. This leads some to question whether education has any role in economic development. ^ The purpose of this study is to provide a broad overview of the role of education, in terms of private rates of return to education, in Taiwan. In the process, a variety of hypotheses about human capital theory are examined and an empirical study of Taiwan's earnings functions are tested to show that education can be an important instrument to increase private rate of return, even under conditions of scarcity of natural and physical resources. Data was collected using the Manpower Survey and Manpower Utilization Survey, conducted by the government. Research questions were analyzed using descriptive statistics, frequencies, and regression analysis. ^ Results indicated that the Manpower Development Plans have been the decisive influence in allowing Taiwan to develop its human resources and achieve success in meeting the needs of Taiwan's economy. The structure of age-earnings profiles showed a strong relationship between earnings and education, and the profiles that successively shift upward are associated with higher levels of education. In the cross-sectional results of the rate of return in 1997, each additional year of schooling leads to a 6.2% increase in income. As to the private rates of return to different levels of education, the results found that the private rates of return are 2.88%, 4.85% and 10.05% for primary, secondary and higher education respectively. In an intertemporal comparison for 1980, 1985, 1990 and 1997, the results showed no significant trend except the private rates of return for primary education have been falling from 3.9% to 2.88%. ^ On the basis of this study, for individual student or family in Taiwan, there is likely to be a strong demand for education, particularly at the higher level. Therefore, a well-developed higher educational level becomes essential and the content of curriculum in higher education becomes another crucial question facing planners in Taiwan if they are going to use education as a means to foster economic development. ^

Genetic algorithms and investment strategies: A global perspective

The profitability of momentum portfolios in the equity markets is derived from the continuation of stock returns over medium time horizons. The empirical evidence of momentum, however, is significantly different across markets around the world. The purpose of this dissertation is to: (1) help global investors determine the optimal selection and holding periods for momentum portfolios, (2) evaluate the profitability of the optimized momentum portfolios in different time periods and market states, (3) assess the investment strategy profits after considering transaction costs, and (4) interpret momentum returns within the framework of prior studies on investors’ behavior. Improving on the traditional practice of selecting arbitrary selection and holding periods, a genetic algorithm (GA) is employed. The GA performs a thorough and structured search to capture the return continuations and reversals patterns of momentum portfolios. Three portfolio formation methods are used: price momentum, earnings momentum, and earnings and price momentum and a non-linear optimization procedure (GA). The focus is on common equity of the U.S. and a select number of countries, including Australia, France, Germany, Japan, the Netherlands, Sweden, Switzerland and the United Kingdom. The findings suggest that the evolutionary algorithm increases the annualized profits of the U.S. momentum portfolios. However, the difference in mean returns is statistically significant only in certain cases. In addition, after considering transaction costs, both price and earnings and price momentum portfolios do not appear to generate abnormal returns. Positive risk-adjusted returns net of trading costs are documented solely during “up” markets for a portfolio long in prior winners only. The results on the international momentum effects indicate that the GA improves the momentum returns by 2 to 5% on an annual basis. In addition, the relation between momentum returns and exchange rate appreciation/depreciation is examined. The currency appreciation does not appear to influence significantly momentum profits. Further, the influence of the market state on momentum returns is not uniform across the countries considered. The implications of the above findings are discussed with a focus on the practical aspects of momentum investing, both in the U.S. and globally.

Dynamic modeling and analysis of single-stage boost inverters under normal and abnormal conditions

Inverters play key roles in connecting sustainable energy (SE) sources to the local loads and the ac grid. Although there has been a rapid expansion in the use of renewable sources in recent years, fundamental research, on the design of inverters that are specialized for use in these systems, is still needed. Recent advances in power electronics have led to proposing new topologies and switching patterns for single-stage power conversion, which are appropriate for SE sources and energy storage devices. The current source inverter (CSI) topology, along with a newly proposed switching pattern, is capable of converting the low dc voltage to the line ac in only one stage. Simple implementation and high reliability, together with the potential advantages of higher efficiency and lower cost, turns the so-called, single-stage boost inverter (SSBI), into a viable competitor to the existing SE-based power conversion technologies.^ The dynamic model is one of the most essential requirements for performance analysis and control design of any engineering system. Thus, in order to have satisfactory operation, it is necessary to derive a dynamic model for the SSBI system. However, because of the switching behavior and nonlinear elements involved, analysis of the SSBI is a complicated task.^ This research applies the state-space averaging technique to the SSBI to develop the state-space-averaged model of the SSBI under stand-alone and grid-connected modes of operation. Then, a small-signal model is derived by means of the perturbation and linearization method. An experimental hardware set-up, including a laboratory-scaled prototype SSBI, is built and the validity of the obtained models is verified through simulation and experiments. Finally, an eigenvalue sensitivity analysis is performed to investigate the stability and dynamic behavior of the SSBI system over a typical range of operation. ^

A Critical Review of the Implied Cost of Equity: A New Way to Estimate the Expected Return

For the last three decades, the Capital Asset Pricing Model (CAPM) has been a dominant model to calculate expected return. In early 1990% Fama and French (1992) developed the Fama and French Three Factor model by adding two additional factors to the CAPM. However even with these present models, it has been found that estimates of the expected return are not accurate (Elton, 1999; Fama &French, 1997). Botosan (1997) introduced a new approach to estimate the expected return. This approach employs an equity valuation model to calculate the internal rate of return (IRR) which is often called, 'implied cost of equity capital" as a proxy of the expected return. This approach has been gaining in popularity among researchers. A critical review of the literature will help inform hospitality researchers regarding the issue and encourage them to implement the new approach into their own studies.

Can minority language proficiency pay: a study on the return on English-Spanish fluent bilingualism in South Florida

This thesis studies the economic return for fluent-bilingualism in South Florida among native-born whites using IPUMS (Integrated Public Use Microdata Series) data for Miami-Dade County (1990). Previous mainstream-oriented theories focus on the benefit in English acquisition for immigrants and their descendants, either denying or ignoring the possible benefit of minority language retention in addition to English acquisition. An alternative literature, on the other hand, suggests that minority language retention can be beneficial in at least three areas: 1) enhancing cognitive ability; 2) accessing community-level social capital; and 3) serving as human capital. This study assesses economic returns in employment and earnings, using logistic and OLS (Ordinary Least Square) regression respectively. The results, countering the mainstream-oriented theories, suggest that fluent bilingualism does have economic consequences. Rather than fully supporting the positive effects thesis, the patterns shown are much more complicated, contingent on an individual's ethnic membership and educational level. Theoretical and substantive implications are discussed and suggestions for future research are made.