Research Outputs

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Now showing 1 - 10 of 26
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    A theory of collateral for the lender of last resort
    (Oxford Univ Press, 2021) Choi, Dong Beom; Santos, Joao A. C.; N/A; Yorulmazer, Tanju; Faculty Member; Graduate School of Social Sciences and Humanities; 328768
    We consider a macroprudential approach to analyze the optimal lending policy for the central bank, focusing on spillover effects that policy exerts on money markets. Lending against high-quality collateral protects central banks against losses, but can adversely affect liquidity creation in markets since high-quality collateral gets locked up with the central bank rather than circulating in markets. Lending against low-quality collateral creates counterparty risk but can improve liquidity in markets. We illustrate the optimal policy incorporating these trade-offs. Contrary to what is generally accepted, lending against high-quality collateral can have negative effects, whereas it may be optimal to lend against low-quality collateral.
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    Aggregate earnings, firm-level earnings, and expected stock returns
    (Cambridge Univ Press, 2008) Tehranian, Hassan; Demirtaş Özgür; Department of Economics; Bali, Turan; Other; Department of Economics; College of Administrative Sciences and Economics; N/A
    This paper provides an analysis of the predictability of stock returns using market-, industry-, and firm-level earnings. Contrary to Lamont (1998), we find that neither dividend payout ratio nor the level of aggregate earnings can forecast the excess market return. We show that these variables do not have robust predictive power across different stock portfolios and sample periods. In contrast to the aggregate-level findings, earnings yield has significant explanatory power for the time-series and cross-sectional variation in firm-level stock returns and the 48 industry portfolio returns. The mean reversion of stock prices as well as the earnings' correlation with expected stock returns are responsible for the forecasting power of earnings yield. These results are robust after controlling for book-to-market, size, price momentum, and post-earnings announcement drift. At the aggregate level, the information content of firm-level earnings about future cash flows is diversified away and higher aggregate earnings do not forecast higher returns.
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    Bondholder governance, takeover likelihood, and division of gains
    (Elsevier, 2023) Akdogu, Evrim; Paukowits, Aysun Alp; Department of Business Administration; Çelikyurt, Uğur; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 47082
    We investigate the effect of creditor rights on the probability of becoming a takeover target by constructing firm-level bond covenant indices. Our primary result is that the more restrictive covenants a firm has, the more likely it is to become the target of an acquisition. This finding is robust to the exclusion of merger-related event-risk covenants which have the opposite impact and appear to reduce takeover likelihood. Furthermore, this effect is not driven by financially distressed firms and rather contained in small, profitable, financially healthy firms with high growth opportunities and low cash holdings. We also find that a higher target covenant index leads to a significant decrease (increase) in target (acquirer) abnormal returns around acquisition announcements and tilts merger gains towards the acquirer, suggesting the presence of a 'cove-nant discount' for potential target firms. Overall, our results are consistent with covenants creating key frictions, and in turn, making firms viable targets for acquirers with possibly deep pockets.
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    Do market prices improve the accuracy of court valuations in chapter 11?
    (Wiley, 2022) Franks, Julian; Lewis, Ryan; Department of Business Administration; Demiroğlu, Cem; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 18073
    The average difference between the court value and postemergence market value of newly issued stocks in Chapter 11 reorganizations exceeds 50%. We show that public dissemination of transactions in defaulted bonds reduces this difference by 23% and largely eliminates interclaimant wealth transfers. The effects of dissemination are only significant when the bonds are sufficiently traded around the court valuation date and when they receive significant amounts of postemergence equity, indicating that the bond's value is sensitive to the size and allocation of the pie. These findings imply that security prices have real effects: they improve the valuations of bankruptcy participants.
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    PublicationOpen Access
    Do physiological and spiritual factors affect economic decisions?
    (Wiley, 2021) Özbaş, Oğuzhan; Silva, Rui C.; Department of Business Administration; Demiroğlu, Cem; Ulu, Mehmet Fatih; Faculty Member; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 18073; N/A
    We examine the effects of physiology and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads.
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    Financial crisis wealth losses and responses among older households in England
    (Wiley-Blackwell, 2013) Banks, James; Crawford, Rowena; Emmerson, Carl; Department of Economics; Crossley, Thomas Fraser; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/A
    Prices of real and financial assets fell substantially in the UK during 2008-09. The fourth wave of the English Longitudinal Study of Ageing (ELSA) was in the field throughout this financial crisis'. We use these data, and earlier ELSA waves, to document the effect of the crisis on those aged 50 and over in England, importantly taking into account that a significant proportion of the wealth of these households is held in forms such as state pensions that will not be directly affected by movements in asset prices. We find that the median fall in wealth among individuals was 8 per cent of total household gross wealth with, on average, richer individuals having experienced a larger decline. We find some evidence that those who experienced greater wealth shocks were more likely to reduce their expected chance of leaving a large bequest and to reduce their spending on certain semi-luxury' items such as clothing and food consumed out of the home.
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    Four approaches to accounting for diversity in global organisations
    (Elsevier, 2016) Tatli, Ahu; Ipek, Gulce; Sameer, Mohammad; Department of Business Administration; Özbilgin, Mustafa; Other; Department of Business Administration; College of Administrative Sciences and Economics; N/A
    This paper examines four distinct approaches to accounting for diversity outcomes in global organisations: shareholder, stakeholder, regulation and global value chain. Drawing on a study of 22 globally significant organisations, our analyses show that there is a need to move beyond narrow framing of benefits of diversity management based on shareholder and stakeholder perspectives. Our study demonstrates that regulation as well as global value chain is pertinent new perspectives that organisations need to move towards if they are to seriously account for diversity outcomes. Yet, our study shows that such a development is not likely to happen easily due to a number of significant challenges in accounting for diversity outcomes in global organisations.
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    Global dividend payout patterns: the US and the rest of the world and the effect of financial crisis
    (Jai Press Inc, 2015) Fatemi, Ali; Fooladi, Iraj; N/A; Bildik, Recep; Teaching Faculty; Graduate School of Business; 185382
    This paper compares the dividend payout behavior of US firms with those of firms in 32 other countries for the period of 1985-2011. It also investigates the possible impact of the 2007 financial crisis on the payout policies in these 33 countries. Results show that the proportion of firms that pay dividends (payers) is lower in the US than that it is in the rest of the world. In both the US and the rest of the world the proportion of payers decreases (and significantly so) in each of the years leading to the year 2000 and then reverses direction and increases during the post-2000 years. (C) 2015 Elsevier Inc. All rights reserved.
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    Going public to acquire? the acquisition motive in IPOs
    (Elsevier Science Sa, 2010) Sevilir, Merih; Shivdasani, Anıl; Department of Business Administration; Çelikyurt, Uğur; Faculty Member; Department of Business Administration; College of Administrative Sciences and Economics; 47082
    Newly public firms make acquisitions at a torrid pace. Their large acquisition appetites reflect the concentration of initial public offerings (IPOs) in mergers and acquisitions(M&A-) intensive industries, but acquisitions by IPO firms also outpace those by mature firms in the same industry. IPO firms' acquisition activity is fueled by the initial capital infusion at the IPO and through the creation of an acquisition currency used to raise capital for both cash- and stock-financed acquisitions along with debt issuance subsequent to the IPO. IPO firms play a bigger role in the M&A process by participating as acquirers than they do as takeover targets, and acquisitions are as important to their growth as research and development (R&D) and capital expenditures (CAPEX). The pattern of acquisitions following an WO shapes the evolution of ownership structure of newly public firms. (C) 2010 Elsevier B.V. All rights reserved.
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    High-frequency trading in the stock market and the costs of options market making
    (Elsevier Sci Ltd, 2024) Nimalendran, Mahendrarajah; Sagade, Satchit; Department of Business Administration; Rzayev, Khaladdin; Department of Business Administration; College of Administrative Sciences and Economics
    We investigate how high-frequency trading (HFT) in equity markets affects options market liquidity. We find that increased aggressive HFT activity in the stock market leads to wider bid-ask spreads in the options market through two main channels. First, options market makers' quotes are exposed to sniping risk from HFTs exploiting put-call parity violations. Second, informed trading in the options market further amplifies the impact of HFT in equity markets on the liquidity of options by simultaneously increasing the options bid-ask spread and intensifying aggressive HFT activity in the underlying market.