September 17-18, 2010
SU-HSE, Pokrovski Bulvar, 11, Room Zh 827
FRIDAY, SEPTEMBER 17
Christian Julliard (London School of Economics and Political Science)
Title: “The Empirical Likelihood of Tail-Sensitive Preferences”
Abstract: We study the asset pricing implication of a recursive utility model with risk preferences that exhibit an aversion to outcomes that are sufficiently disappointing. In particular, we extend the Generalized Disappointment Aversion (GDA) framework of Routledge and Zin (2010) to the analysis of a broad cross-section of assets returns. In order to assess the empirical relevance of the GDA framework, we develop a novel econometric technique, based on relative entropy minimization, that allows us to identify the disappointment component of the pricing kernel. We identify a small set of disappointment states in the post-War U.S. data, and show that the corresponding pricing kernel is able to explain about 90% of the cross-sectional variation of asset returns.
Maxim Nikitin (International College of Economics and Finance SU-HSE)
Title: “Double Contagion: The Impact of Globalization and Exchange Rate Regime on Financial Fragility”
Abstract: We study the impact on nancial fragility of globalization and a switch from managed to freely oating exchange rate regime in the context of a two-country multi-region model a la Allen and Gale (Journal of Political Economy, 2000) with open-economy monetary features of Chang and Velasco (Journal of Economic Theory, 2000). In this economy, both banking and exchange rate crises may develop. In contrast to Allen and Gale, we nd that increased globalization, i.e. a more complete structure of links among regions, can increase nancial fragility, if the smaller country maintains a oating exchange rate regime. Furthermore, in a globalized world a higher level of nancial fragility may result from a switch to the oating exchange rate regime in the smaller country. The intuition behind these results is that the smaller economy with oating exchange rate regime `re-exports' negative shocks to the neighboring region(s) of the larger economy via the exchange rate depreciation rather than absorbs them. These regions cannot follow suit, and so are more likely to suer from the nancial meltdown. These ndings rationalize the phenomenon of `fear of oating' in many emerging market economies in 1990s and 2000s.
Stanimir Morfov (International College of Economics and Finance SU-HSE)
Title: “Relative Performance Evaluation and Managerial Outside Options”
Abstract: This paper provides a theoretical explanation of the relative performance evaluation (RPE) puzzle. In a simple model of moral hazard with limited commitment where aggregate shocks affect both reservation utilities and
firm's technology, we
find that RPE is optimal under very speci
c circumstances. We consider different technologies: unaffected by aggregate shocks, pro-cyclical, counter-cyclical and different demand for managerial services: neutral, pro-cyclical and produce interesting predictions for executive pay. The effect of aggregate shocks on the optimal choice of effort is also analyzed.
Klaus Gugler (University of Vienna)
Title: “Market Optimism and Merger Waves”
Abstract: One of the most conspicuous features of mergers is that they come in waves, and that these waves are correlated with increases in share prices and price/earnings ratios. We argue that stock market booms and merger waves are both driven by increases in optimism in financial markets. We discuss two behavioral hypotheses about mergers – the managerial discretion and overvaluation hypotheses – claim that merger waves are driven by market optimism. We also briefly consider and reject two neoclassical hypotheses that claim to account for mergers waves. We provide empirical support for the managerial theory by showing that the amounts of assets acquired by companies increase as optimism in financial markets increases, and that the returns to acquiring companies’ shareholders are inversely related to market optimism at the time of mergers. We also show that our measures of market optimism can explain managerial choices of finance for mergers.
Vladimir Sokolov (International College of Economics and Finance SU-HSE)
Title: “The Impact of External Borrowing on Capital Structure of Russian Banks”
Abstract: Using data on foreign borrowing by Russian banks, I identify banks that were financially constrained at the onset of the sudden stop caused by the collapse of the Lehman Brothers in September 2008. In a natural experiment set-up, I trace the impact of liquidity infusions by the CBR on banks’ funding and lending decisions. Applying the difference-in-difference method, I find that financially constrained banks increased their demand for central bank funding relatively more than non-constrained banks after the crisis. Secondly, I find that despite the fact that financially constrained banks obtained CBR funding, they nevertheless cut their lending to corporate borrowers in a short-term maturity segment relatively more than non-constrained bank. My last finding is that financially constrained banks increased lending to corporate borrowers in the long-term maturity segment. This result is puzzling and is probably due to the fact that banks were forced to extend the terms of credit to existing borrowers after the crisis.
SATURDAY, SEPTEMBER 18
Branko Urosevic (University of Belgrade)
Title: “Noise and aggregation of information in large markets”
Abstract: We study the relation between noise (liquidity traders, endowment shocks) and the aggregation of information in financial markets with large number of agents. We show that as long as noise increases with the number of agents, the limiting equilibrium is well-defined and leads to non-trivial information acquisition, even when per-capita noise tends to zero. In such equilibrium risk sharing and price revelation play different roles than in the standard limiting economy in which per-capita noise is finite. We apply our model to study information sales by a monopolist, and information acquisition in multi-asset markets, showing that it leads to qualitatively different results with respect to those in the existing literature. Our conditions on noise are shown to be necessary and sufficient to have limiting economies with perfectly competitive behavior consistent with endogenous information acquisition.
Sergey Gelman (International College of Economics and Finance SU-HSE)
Title: “Transaction Costs, Liquidity and Expected Returns at the Berlin Stock Exchange, 1892-1913”
Abstract: We estimate effective spreads and round-trip transaction costs at the Berlin Stock Exchange for the period 1892-1913 using daily stock market returns for a sample of 27 stocks. Our results show that transaction costs at the main stock exchange in a bank-based financial system at the turn of the 20th century were quite low and about comparable to transaction costs in modern markets. Nonetheless, transaction costs varied substantially over time and across securities, whereby the cross-sectional variation could be substantially explained by firm size and previous year return, whereas time variation could be explained by crises and trading volume. Furthermore, we find evidence that expected transaction costs positively affect expected excess returns, whereas standard risk characteristics, such as market beta and size have no significant influence.
Marie-Ann Betschinger (International College of Economics and Finance SU-HSE)
Title: “Does a firm’s ownership structure influence the riskiness of FDI programs? Firm level evidence from the Japanese electronics industry”
Abstract: The paper focuses on the relationship between the risk involved in foreign direct investment (FDI) projects and the ownership structure of the investing company. The corporate governance literature has highlighted that the ownership structure of a company plays a non-negligible role for corporate risk taking in many business policy fields, while research in international strategy has shown a relationship between the ownership type of a company and internationalization decisions per se. This paper combines the two strands of literature and argues that the relationship between the ownership structure of a firm and its risk-taking behaviour should be rendered evident in the risk involved in a firm’s foreign expansion policy via FDI. The focus of the paper is on the role of banks, owner-managers, and foreigners in this context. By merging two databases on Japanese listed firms and their foreign affiliates in the electronics industry in a parent firm panel from 1992-2004, the paper only finds weak evidence for the relevance of owners: When accounting for dynamic relationships between the past and current level of FDI risk, a firm’s ownership pattern loses most of its explanatory power. Only owner-managers robustly influence the riskiness of FDI programs. Ceteris paribus, multinational firms with owner-managers among their top-five owners have a FDI portfolio which is of higher risk than of firms without owner-managers. Overall, other corporate determinants such as return on assets, sales growth, and firm size better explain the risk level of the existing FDI portfolio.
Alexander Settles (Faculty of Management, HSE)
Title: “Emerging market multinationals – do they create value and why? – A quantitative analysis”
Abstract: The rapid growth in the global economy in the 2000s coincided with an increased internationalization of emerging market enterprises through cross-border mergers and acquisitions (M&A). We examine whether their foray into cross-border M&As results in a similar or different outcome from corporations based in developed markets. We present the framework of our research project as well as preliminary results on one of its research questions, namely whether the determinants of deal completion differ between developed and emerging market based firms. We use the Zephir dataset as provided by Bureau Van Dijk on M&A deals and analyze 8,903 deals for the period 1998-2010. Using probit and logit regressions for deal completion, we find no evidence that emerging market origin matters. However, firm and deal characteristics explain the success of a takeover bid.
Carsten Sprenger (International College of Economics and Finance SU-HSE)
Title: “Does Nationalization Work? – Evidence from Russian State Takeovers”
Abstract: There is the recent trend toward more state influence in certain sectors in the Russian economy. We study the related incidence of nationalizations, in most cases the purchase of previously privatized companies by state-owned enterprises and its effect on the performance of the acquired firms. To this end, we construct a database of nationalization deals in Russia for the years 2001-2008. Apart from the overall effect on performance we investigate some of the mechanisms through which state ownership may affect company performance, in particular the access to soft loans, changes in financial leverage, the composition of the board of directors, and changes in the top management.
