Financial Slack and Bidding Firms’ Takeover Announcement Stock Returns – an Event Study

Despite the fact that the literature on mergers and acquisitions is extensive, relatively little effort has been made to examine the relationship between the acquiring firms’ financial slack and short-term post-takeover announcement abnormal stock returns. In this study, the case is made that the financial slack of a firm is not only an outcome of past business and financing activities but it also may affect the quality of acquisition decisions. We will hypothesize that the level of financial slack in a firm is negatively associated with the abnormal returns following acquisition announcements because slack reduces managerial discipline over the use of corporate funds and also because it may give rise to managerial self-serving behavior. In this study, financial slack is measured in terms of three financial statements ratios: leverage ratio, cash and equivalents to total assets ratio and free cash flow to total assets ratio. The data used in this paper is collected from two main sources. A list comprising 90 European acquisition announcements is retrieved from Thomson One Banker database. The stock price data and financial statements information for the respective firms is collected using Datastream. Our empirical analysis is two-fold. First, we conduct a two-sample t-test where we find that the most slack-rich firms experience lower abnormal returns than the most slack-poor firms in the event window [-1, +1], significant at 5% risk level. Second, we perform a cross sectional regression for sample firms using three financial statements ratios to explain cumulative abnormal returns (CAR). We find that leverage shows a statistically significant positive relationship with cumulative abnormal returns in event window [-1; +1] (significance 5%). Moreover, cash to total assets ratio showed a weak negative relationship with CAR (significant at 10%) in event window [-1; +1]. We conclude that our hypothesis for the inverse relationship between slack and abnormal returns receives empirical support. Based on the results of the event study we get empirical support for the hypothesis that the capital markets expect the acquisitions undertaken by slack-rich firms to more likely be driven by managerial self-serving behavior and hubris than do those undertaken by slackpoor firms, signaling possible agency problems and behavioral biases.

The Impact of European Macroeconomic News Announcements on CIVETS Stock Markets

The purpose of this research is to investigate how CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) stock markets are integrated with Europe as measured by the impact of euro area (EA) scheduled macroeconomic news announcements, which are related to macroeconomic indicators that are commonly used to indicate the direction of the economy. Macroeconomic announcements used in this study can be divided into four categories; (1) prices, (2) real economy, (3) money supply and (4) business climate and consumer confidence. The data set consists of daily market data from CIVETS and scheduled macroeconomic announcements from the EA for the years 2007-2012. The econometric model used in this research is Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH). Empirical results show diverse impacts of macroeconomic news releases and surprises for different categories of news supporting the perception of heterogeneity among CIVETS. The analyses revealed that in general EA macroeconomic news releases and surprises affect stock market volatility in CIVETS and only in some cases asset pricing. In conclusion, all CIVETS stock markets reacted to the incoming EA macroeconomic news suggesting market integration to some extent. Thus, EA should be considered as a possible risk factor when investing in CIVETS.

Welcome to Helsinki

Presentation at Open Repositories 2013 in Charlottetown, PEI in Canada.

Latvialaisen kokoelman (1820-1917) luettelo. 1-4. Helsinki 1978-1981.

Lettonica kokoelma sisältää vapaakappaleina saadun, Venäjän keisarikunnan alueella vuosien 1828-1917 välillä painetun latviankielisen kirjallisuuden. Kokoelman laajuus on runsaat 10 000 nimekettä, josta kirjoja on 7 200. Kirjakokoelma sisältää kaunokirjallisuutta, lastenkirjoja, luonnontieteellistä ja humanistista kirjallisuutta sekä hengellistä kirjallisuutta. Sanoma- ja aikakauslehtiä kokoelmassa on noin 200 nimekettä. Kokoelmassa on suuri määrä pienpainatteita.

Advanced ceramics: evaluation of the mechanism of stock removal and ground surface quality

The aim of this work is to evaluate the mechanism of stock removal and the ground surface quality of advanced ceramics machined by a surface grinding process using diamond grinding wheels. The analysis of the grinding performance was done regarding the cutting surface wear behavior of the grinding wheel for ceramic workpieces. The ground surface was evaluated using Scanning Electron Microscopy (SEM). As a result it can be said that the mechanism of material removal in the grinding of ceramic is largely one of brittle fracture. The increase of the h max can reduce the tangential force required by the process. Although, it results in an increase in the surface damage, reducing the mechanical properties of the ground component.

Market integration, return and volatility dynamics; empirical evidence from African stock markets

Frontier and Emerging economies have implemented policies with the objective of liberalizing their equity markets. Equity market liberalization opens the domestic equity market to foreign investors and as well paves the way for domestic investors to invest in foreign equity securities. Among other things, equity market liberalization results in diversification benefits. Moreover, equity market liberalization leads to low cost of equity capital resulting from the lower rate of return by investors. Additionally, foreign and local investors share any potential risks. Liberalized equity markets also become liquid considering that there are more investors to trade. Equity market liberalization results in financial integration which explains the movement of two markets. In crisis period, increased volatility and co-movement between two markets may result in what is termed contagion effects. In Africa, major moves toward financial liberalization generally started in the late 1980s with South Africa as the pioneer. Over the years, researchers have studied the impact of financial liberalization on Africa’s economic development with diverse results; some being positive, others negative and still others being mixed. The objective of this study is to establish whether African stock-markets are integrated into the United States (US) and World market. Furthermore, the study helps to see if there are international linkages between the Africa, US and the world markets. A Bivariate- VAR- GARCH- BEKK model is employed in the study. In the study, the effect of thin trading is removed through series of econometric data purification. This is because thin trading, also known as non-trading or inconsistency of trading, is a main feature of African markets and may trigger inconsistency and biased results. The study confirmed the widely established results that the South Africa and Egypt stock markets are highly integrated with the US and World market. Interestingly, the study adds to knowledge in this research area by establishing the fact that Kenya is very integrated with the US and World markets and that it receives and exports past innovations as well as shocks to and from the US and World market.

Stock Price Reactions on M&A, Dividends and Game Releases. Evidence from Gaming Industry.

A rapidly growing gaming industry, which specializes on PC, console, online and other games, attracts attention of investors and analysts, who try to understand what drives changes of the gaming industry companies’ stock prices. This master thesis shows the evidence that, besides long-established types of events (M&A and dividend payments), the companies’ stock price changes depend on industry-specific events. I analyzed specific for gaming industry events - game releases with respect to its subdivisions: new games-sequels, games ratings and subdivision according to a developer of a game (self-developed by publisher or outsourced). The master thesis analyzes stock prices of 55 companies from gaming industry from all over the world. The research period covers 5 year, spreading from April 2008 to April 2013. Executed with an event study method, results of the research show that all the analyzed events types have significant influence on the stock prices of the gaming industry companies. The current master thesis suggests that acquisitions in the industry affect positively bidders’ and targets’ stock prices. Mergers events cause positive stock price reactions as well. But dividends payments and game releases events influence negatively on the stock prices. Game releases’ effect is up to -2.2% of cumulative average abnormal return (CAAR) drop during the first ten days after the game releases. Having researched different kinds of events and identified the direction of their impact, the current paper can be of high value for investors, seeking profits in the gaming industry, and other interested parties.