Stock repurchases and treasury share sales:do they stabilize price and enhance liquidity?

Can companies reduce the volatility and increase the liquidity of their stocks by trading them? In the context of the Italian stock market, where companies have far more leeway to sell as well as buy their own stocks than in the U.S., the answer is yes. We examine the effects of trading (open-market share repurchases and treasury shares sales) on liquidity (bid–ask spread) and volatility (return variance). Further, we examine the impact of shareholder approvals of repurchase programs on liquidity and volatility. We find clear evidence that trading increases liquidity and reduces volatility. These results are consistent with our analysis of the motives Italian companies give for making share repurchases.

Empirical studies on share issuance and repurchase decisions

Financial constraints influence corporate policies of firms, including both investment decisions and external financing policies. The relevance of this phenomenon has become more pronounced during and after the recent financial crisis in 2007/2008. In addition to raising costs of external financing, the effects of financial crisis limited the availability of external financing which had implications for employment, investment, sale of assets, and tech spending. This thesis provides a comprehensive analysis of the effects of financial constraints on share issuance and repurchases decisions. Financial constraints comprise both internal constraints reflecting the demand for external financing and external financial constraints that relate to the supply of external financing. The study also examines both operating performance and stock market reactions associated with equity issuance methods. The first empirical chapter explores the simultaneous effects of financial constraints and market timing on share issuance decisions. Internal financing constraints limit firms’ ability to issue overvalued equity. On the other hand, financial crisis and low market liquidity (external financial constraints) restrict availability of equity financing and consequently increase the costs of external financing. Therefore, the study explores the extent to which internal and external financing constraints limit market timing of equity issues. This study finds that financial constraints play a significant role in whether firms time their equity issues when the shares are overvalued. The conclusion is that financially constrained firms issue overvalued equity when the external equity market or the general economic conditions are favourable. During recessionary periods, costs of external finance increase such that financially constrained firms are less likely to issue overvalued equity. Only unconstrained firms are more likely to issue overvalued equity even during crisis. Similarly, small firms that need cash flows to finance growth projects are less likely to access external equity financing during period of significant economic recessions. Moreover, constrained firms have low average stock returns compared to unconstrained firms, especially when they issue overvalued equity. The second chapter examines the operating performance and stock returns associated with equity issuance methods. Firms in the UK can issue equity through rights issues, open offers, and private placement. This study argues that alternative equity issuance methods are associated with a different level of operating performance and long-term stock returns. Firms using private placement are associated with poor operating performance. However, rights issues are found empirically to be associated with higher operating performance and less negative long-term stock returns after issuance in comparison to counterpart firms that issue private placements and open offers. Thus, rights issuing firms perform better than open offers and private placement because the favourable operating performance at the time of issuance generates subsequent positive long-run stock price response. Right issuing firms are of better quality and outperform firms that adopt open offers and private placement. In the third empirical chapter, the study explores the levered share repurchase of internally financially unconstrained firms. Unconstrained firms are expected to repurchase their shares using internal funds rather than through external borrowings. However, evidence shows that levered share repurchases are common among unconstrained firms. These firms display this repurchase behaviour when they have bond ratings or investment grade ratings that allow them to obtain cheap external debt financing. It is found that internally financially unconstrained firms borrow to finance their share repurchase when they invest more. Levered repurchase firms are associated with less positive abnormal returns than unlevered repurchase firms. For the levered repurchase sample, high investing firms are associated with more positive long-run abnormal stock returns than low investing firms. It appears the market underreact to the levered repurchase in the short-run regardless of the level of investments. These findings indicate that market reactions reflect both undervaluation and signaling hypotheses of positive information associated with share repurchase. As the firms undertake capital investments, they generate future cash flows, limit the effects of leverage on financial distress and ultimately reduce the risk of the equity capital.

Role of price and enforcement in water allocation: Insights from Game Theory

As many countries are moving toward water sector reforms, practical issues of how water management institutions can better effect allocation, regulation, and enforcement of water rights have emerged. The problem of nonavailability of water to tailenders on an irrigation system in developing countries, due to unlicensed upstream diversions is well documented. The reliability of access or equivalently the uncertainty associated with water availability at their diversion point becomes a parameter that is likely to influence the application by users for water licenses, as well as their willingness to pay for licensed use. The ability of a water agency to reduce this uncertainty through effective water rights enforcement is related to the fiscal ability of the agency to monitor and enforce licensed use. In this paper, this interplay across the users and the agency is explored, considering the hydraulic structure or sequence of water use and parameters that define the users and the agency`s economics. The potential for free rider behavior by the users, as well as their proposals for licensed use are derived conditional on this setting. The analyses presented are developed in the framework of the theory of ""Law and Economics,`` with user interactions modeled as a game theoretic enterprise. The state of Ceara, Brazil, is used loosely as an example setting, with parameter values for the experiments indexed to be approximately those relevant for current decisions. The potential for using the ideas in participatory decision making is discussed. This paper is an initial attempt to develop a conceptual framework for analyzing such situations but with a focus on the reservoir-canal system water rights enforcement.

Phenolic composition of South American red wines classified according to their antioxidant activity, retail price and sensory quality

In this study, 73 South American red wines (Vitis vinifera) from 5 varietals were classified based on sensory quality, retail price and antioxidant activity and characterised in relation to their phenolic composition. ORAC and DPPH assays were assessed to determine the antioxidant activity, and sensory analysis was conducted by seven professional tasters using the Wine Spirits Education Trust`s structured scales. The use of multivariate statistical techniques allowed the identification of wines with the best combination of sensory characteristics, price and antioxidant activity. The most favourable varieties were Malbec, Cabernet Sauvignon, and Syrah produced in Chile and Argentina. Conversely, Pinot Noir wines displayed the lowest sensory characteristics and antioxidant activity. These results suggest that the volatile compounds may be the main substances responsible for differentiating red wines on the basis of sensory evaluation. (C) 2011 Elsevier Ltd. All rights reserved.

New constituents from Mikania laevigata Shultz Bip. ex Baker

A new phenylpropanoid and two new diterpenes were isolated from the leaves of the plant Mikania laevigata Shultz Bip. ex Baker. The structures of these compounds were established by 1D- and 2D-nuclear magnetic resonance spectroscopic techniques and mass spectrometry data. Taraxerol, lupeol, coumarin, syringaldehyde, trans-melilotoside, cis-melilotoside, adenosine, patuletin 3-O-beta-D-glucopyranoside, kaempferol 3-O-beta-D-glucopyranoside, quercetin 3-O-beta-D-glucopyranoside, methyl 3,5-di-O-caffeoyl quinate, and 3,3`,5-trihydroxy-4`,6,7-trimethoxyflavone were isolated too. In addition, the compounds dihydrocoumarin, spathulenol, caryophyllene oxide, kaurenoic acid, beyerenoic acid, and lupeol acetate were identified by GC-MS. (C) 2010 Elsevier Ltd. All rights reserved.

Modeling ex vivo hematopoiesis using chemical engineering metaphors

Ex vivo hematopoiesis is increasingly used for clinical applications. Models of ex vivo hematopoiesis are required to better understand the complex dynamics and to optimize hematopoietic culture processes. A general mathematical modeling framework is developed which uses traditional chemical engineering metaphors to describe the complex hematopoietic dynamics. Tanks and tubular reactors are used to describe the (pseudo-) stochastic and deterministic elements of hematopoiesis, respectively. Cells at any point in the differentiation process can belong to either an immobilized, inert phase (quiescent cells) or a mobile, active phase (cycling cells). The model describes five processes: (1) flow (differentiation), (2) autocatalytic formation (growth),(3) degradation (death), (4) phase transition from immobilized to mobile phase (quiescent to cycling transition), and (5) phase transition from mobile to immobilized phase (cycling to quiescent transition). The modeling framework is illustrated with an example concerning the effect of TGF-beta 1 on erythropoiesis. (C) 1998 Published by Elsevier Science Ltd. All rights reserved.

Indirect certainty equivalents for the firm facing price and production uncertainty

Producer decisionmaking under uncertainty is characterized using indirect objective functions. The characterization is for the class of producers with continuous and nondecreasing preferences over stochastic incomes who face both price and production uncertainty. (C) 2002 Elsevier Science B.V. All rights reserved.

Flex cars and the alcohol price

We build a model that incorporates the effect of the innovative ""flex"" car, an automobile that is able to run with either gasoline or alcohol, on the dynamics of fuel prices in Brazil. Our model shows that differences regarding fuel prices will now depend on the proportions of alcohol, gasoline and flex cars in the total stock. Conversely, the demand for each type of car will also depend on the expected future prices of alcohol and gasoline (in addition to the car prices). The model reflects our findings that energy prices are tied in the long run and that causality runs stronger from gasoline to alcohol. The estimated error correction parameter is stable, implying that the speed of adjustment towards equilibrium remains unchanged. The latter result is probably due to a still small fraction of flex cars in the total stock (approx. 5%), despite the fact that its sales nearly reached 100% in 2006. (C) 2009 Elsevier B.V. All rights reserved.

Anticonvulsant profile of the alkaloids (+)-erythravine and (+)-11-alpha-hydroxy-erythravine isolated from the flowers of Erythrina mulungu Mart ex Benth (Leguminosae-Papilionaceae)

Neural mechanisms underlying the onset and maintenance of epileptic seizures involve alterations in inhibitory and/or excitatory neurotransmitter pathways. Thus, the prospecting of novel molecules from natural products that target both inhibition and excitation systems has deserved interest in the rational design of new anticonvulsants. We isolated the alkaloids (+)-erythravine and ( +)-11-alpha-hydroxyerythravine from the flowers of Erythrina mulungu and evaluated the action of these compounds against chemically induced seizures in rats. Our results showed that the administration of different doses of (+)-erythravine inhibited seizures evoked by bicuculline, pentylenetetrazole, and kainic acid at maximum of 80, 100, and 100%, respectively, whereas different doses of (+)-11-alpha-hydroxy-erythravine inhibited seizures at a maximum of 100% when induced by bicuculline, NMDA, and kainic acid, and, to a lesser extent, PTZ (60%). The analysis of mean latency to seizure onset of nonprotected animals, for specific doses of alkaloids, showed that (+)-erythravine increased latencies to seizures induced by bicuculline. Although (+)-erythravine exhibited very weak anticonvulsant action against seizures induced by NMDA, this alkaloid increased the latency in this assay. The increase in latency to onset of seizures promoted by (+)-11-alpha-hydroxy-erythravine reached a maximum of threefold in the bicuculline test. All animals were protected against death when treated with different doses of (+)-11-alpha-hydroxy-erythravine in the tests using the four chemical convulsants. Identical results were obtained when using (+)-erythravine in the tests of bicuculline, NMDA, and VIZ, and, to a lesser extent, kainic acid. Therefore, these data validate the anticonvulsant properties of the tested alkaloids, which is of relevance in consideration of the ethnopharmacological/biotechnological potential of E. mulungu. (C) 2010 Elsevier Inc. All rights reserved.

Reserve price commitments in auctions

It is well known that the optimal auction-one that maximizes the seller's expected revenue-can be implemented using a standard auction format with a suitably chosen reserve price. This reserve price is above the seller's value of retaining the object and the mechanism requires a commitment not to sell the object below the reserve. This commitment is what makes the reserve valuable to the seller. However, in practice, a reserve price commits the seller to sell the object if the reserve is reached, but does not commit her to withhold the object from sale if bidding falls short of the reserve. In this note we investigate whether reserve prices remain valuable for the seller when she may negotiate with the highest bidder if the reserve is not met. We show that the value of the reserve price may be completely undermined if the seller is a sufficiently weak bargainer. (c) 2004 Elsevier B.V. All rights reserved.

Effect of 4% titanium tetrafluoride solution on dental erosion by a soft drink: An in situ/ex vivo study

Objective: This in situ/ex vivo study assessed the effect of titanium tetrafluoride (TiF4) on permanent human enamel subjected to erosion. Design: Ten volunteers took part in this study performed in two phases. In the first phase (ERO), they wore acrylic palatal appliances containing two enamel blocks, divided into two rows: TiF4 (F) and no-TiF4 (no-F). During the 1st day, the formation of a salivary pellicle was allowed. In the 2nd day, the TiF4 solution was applied on one row (ERO + F), whereas on the other row no treatment was performed (ERO + no-F). From 3rd until 7th day, the blocks were subjected to erosion, 4x per day. In the 2nd phase (no-ERO), the volunteers wore acrylic palatal appliances containing one enamel block, during 2 days, to assess the effect of TiF4 only (no-ERO + F). Enamel alterations were determined using profilometry (wear), microhardness (%SMHC) tests, scanning electron microscope and microprobe analysis. The %SMHC and wear were tested using ANOVA and Tukey`s post hoc tests (p < 0.05). Results: The mean of %SMHC and wear ( mu m) values ( +/- S.D.) were, respectively: ERO + F -73.32 +/- 5.16(A)/2.40 +/- 0.60(a); ERO + no-F -83.49 +/- 4.59B/1.17 +/- 0.48(b) and no-ERO + F -67.92 +/- 6.16(A)/0.21:E 0.09(c). In microscope analysis, the no-F group showed enamel with honeycomb appearance. For F groups, it was observed a surface coating with microcracks. The microprobe analysis revealed the presence of the following elements (%) in groups ERO + F, ERO + no-F and no-ERO + F, respectively: Ca (69.9, 72.5, 66.25); P (25.9, 26.5, 26.06); Ti (3.0, 0, 5.93). Conclusions: The TiF4 was unable to reduce dental erosion. (c) 2007 Elsevier Ltd. All rights reserved.

Light cola drink is less erosive than the regular one: An in situ/ex vivo study

Objective: This in situ/ex vivo study assessed the erosive potential of a light cola drink when compared to a regular one. Methods: During 2 experimental 14-days crossover phases, eight volunteers wore palatal devices with 2 human enamel blocks. The groups under study were: group light, erosive challenge with light cola drink and group regular, erosive challenge with regular cola drink. During 14 days, erosive challenges were performed extraorally 3X/day. In each challenge, the device was immersed in 150 ml of light cola (group light) or regular cola (group regular) for 5 min. Erosion was analysed by surface profilometry (mu m) and surface microhardness change (%SMH). The data were statistically analyzed using paired t test (p<0.05). Results: Group light (0.6 +/- 0.2 mu m) showed significantly lesser wear than group regular (3.1 +/- 1.0 mu m). There was no significant difference between the groups for the %SMH (group light -63.9 +/- 13.9 and group regular -78.5 +/- 12.7). Conclusions: The data suggest that the light cola drink is less erosive than the regular one. (C) 2008 Elsevier Ltd. All rights reserved.

Impact of a price-maker pumped storage hydro unit on the integration of wind energy in power systems

The increasing integration of larger amounts of wind energy into power systems raises important operational issues, such as the balance between power generation and demand. The pumped storage hydro (PSH) units are one possible solution to mitigate this problem, once they can store the excess of energy in the periods of higher generation and lower demand. However, the behaviour of a PSH unit may differ considerably from the expected in terms of wind power integration when it operates in a liberalized electricity market under a price-maker context. In this regard, this paper models and computes the optimal PSH weekly scheduling in a price-taker and price-maker scenarios, either when the PSH unit operates in standalone and integrated in a portfolio of other generation assets. Results show that the price-maker standalone PSH will integrate less wind power in comparison with the price-taker situation. Moreover, when the PSH unit is integrated in a portfolio with a base load power plant, the role of the price elasticity of demand may completely change the operational profile of the PSH unit. (C) 2014 Elsevier Ltd. All rights reserved.

Price-setting dynamical duopoly with incomplete information

We consider a price competition in a duopoly with substitutable goods, linear and symmetric demand. There is a firm (F 1) that chooses first the price p 1 of its good; the other firm (F 2) observes p 1 and then chooses the price p 2 of its good. The conclusions of this price-setting dynamical duopoly are substantially altered by the presence of either differentiated goods or asymmetric information about rival’s production costs. In this paper, we consider asymmetric information about rival’s production costs. We do ex-ante and ex-post analyses of firms’ profits and market prices. We compare the ex-ante firms’ expected profits with the ex-post firms’ profits.

The price of honour: The corporate governance of Banco Espirito Santo

The Price of Honour is a case study, supported with teaching notes, which describes the events and circumstances surrounding the implosion of one of Portugal’s most systemically important banks - Banco Espírito Santo (BES). The case focuses on BES’s corporate governance and how the Espírito Santo family’s tight control of the bank led to its exploitation. Although the situation caught the attention of the bank’s supervisors, their untimely actions could not prevent BES’s financial health from crumbling only two months after a rights issue. With little leeway, the supervisors put forward a resolution which dramatically ended the bank’s centennial legacy.