•March 2020 stock market crash triggered by COVID-19.•Natural gas, food, healthcare, and software stocks earn high positive returns.•Petroleum, real estate, entertainment, and hospitality stocks fall ...dramatically.•Loser stocks exhibit extreme asymmetric volatility.•Differential reaction of poorest performers to COVID-19.
This paper investigates the US stock market performance during the crash of March 2020 triggered by COVID-19. We find that natural gas, food, healthcare, and software stocks earn high positive returns, whereas equity values in petroleum, real estate, entertainment, and hospitality sectors fall dramatically. Moreover, loser stocks exhibit extreme asymmetric volatility that correlates negatively with stock returns. Firms react in a variety of different ways to the COVID-19 revenue shock. The analysis of the 8K and DEF14A filings of poorest performers reveals departures of senior executives, remuneration cuts, and (most surprisingly) newly approved cash bonuses and salary increases.
We examine the impact of family control on the cost of raising external funds by family enterprises. Using a sample of Australian publicly listed firms, we find a significantly negative relation ...between cost of newly raised capital and family control. Moreover, we show that this relationship varies with the quality of corporate governance and the quality of firm's information environment. Furthermore, we conduct several robustness checks and consistently find that our main results remain unchanged. Overall, our evidence suggests that family firms have easier access to external financing fostered by family involvement in the ownership and control.
This paper examines the efficiency of the market for non-fungible tokens (NFTs) against the backdrop of the market for fungible tokens (FTs) that includes Bitcoin and Ethereum. We focus on two ...important shocks: the outbreak of COVID-19 and the Russia-Ukraine conflict. To this end, we employ martingale difference sequence and conditional heteroscedasticity estimation techniques. We find that the efficiency of both markets fluctuates in time and the aforementioned shocks have a profound effect on FTs and NFTs. More specifically, we find that the effect of COVID-19 is heterogeneous for both markets, whereas that of the Russian invasion of Ukraine is homogenous for NFTs but heterogeneous for FTs.
•Market efficiency of the fungible (FT) and non-fungible tokens (NFT) is analyzed.•Two large exogenous shocks to the cryptocurrency market are examined.•Shock induced by COVID-19 has homogenous effect on market efficiency of FT and NFT.•Shock induced by Russia-Ukraine conflict has heterogenous effect on both markets.
This paper proposes the use of social media as a proxy for financial information. Using an extended sample of 53,580,759 tweets and employing text analysis tools (Latent Dirichlet Allocation and Term ...Frequency–Inverse Document Frequency), we determine the information being exchanged on any given day. We train machine‐learning classifiers and forecast crypto price movements for more than 8000 cryptocurrencies and gauge market efficiency through successful forecasts based on public information. We propose various metrics of market efficiency for cryptocurrency assets and demonstrate that market efficiency is higher during the first 6 months after the Initial Coin Offering. We also examine the efficiency behavior of individual currencies during crisis periods.
•Role of managerial incentives around organizational restructuring is investigated.•Stock option vega positively affects changes in firm value and riskiness.•Stock option delta negatively affects ...changes in firm value and riskiness.•Overall, executive incentives induce more conservative, low-risk investment choices.
We investigate the role of CEO incentives around asset restructuring known as corporate spin-off. More specifically, we focus on executive stock option delta and vega vis-à-vis changes in firm value and firm riskiness in response to the corporate spin-off. Controlling for self-selection of the spin-off decision, we find that executive stock option vega is positively related to changes in firm value as well as changes in firm risk. Conversely, we find that executive stock option delta is negatively related to changes in firm value and firm risk. Finally, we estimate the Fazzari et al. (1988) investment model and show that at the business segment level, CEO incentives are positively linked to capital spending. Overall, our study extends the current literature by documenting the role of executive stock option delta and vega in the context of corporate spin-offs.
•COVID-19 economic crisis has significant impact on the firms’ speed of adjustment to target leverage ratios.•Firms tend to adjust their capital structure more rapidly in the period following the ...breakout of COVID-19.•Speed of adjustment is significantly greater for firms from the economy affected more severely by the COVID-19 economic crisis.
This paper investigates changes in the speed of adjustment toward target leverage ratio under the impact of COVID-19 economic crisis. Using an international sample of publicly listed firms, we find that, on average, firms tend to adjust their capital structure more rapidly in the period following the breakout of COVID-19. Furthermore, we find that firms domiciled in countries in which COVID-19 causes more severe damage, adjust their target leverage quicker than firms domiciled in less severely affected countries. Overall, our study aims at developing a better understanding of the impact of COVID-19 on corporate financing decisions.
In this paper, we investigate whether institutional investors intervene in firms in order to impact their incentive systems. We use metrics based on geographic distance between institutional ...investors as proxies for the intensity of their strategic interactions and plausible interventions. We find that when investors are geographically proximate to one another, firms tend to adopt executive compensation contracts that exhibit more performance-based mechanisms, higher incentives to expend managerial effort, and higher incentives to make risky and positive NPV policy choices. We also find that geographic distance between institutions is a significant determinant of the executive pay differentials.
•We study investor coordination and its impact on managerial incentive systems.•We proxy investor coordination by unique measures of geographic proximity.•When investors are proximate, firms adopt more performance-based mechanisms.•Investor proximity leads to higher incentives to take risks and expand effort.•When investors are geographically distant, executive pay disparity is greater.
This paper examines whether differences in the quality of investor protection between countries affect firm riskiness and firm performance during the COVID-19 economic downturn. Using a large ...cross-country dataset and a broad variety of controls measured at the state and firm level, we find that jurisdictions that offer stronger investor protection experience significantly lower volatility and better performance during the pandemic. This effect is amplified in countries strongly affected by COVID-19. Our results contribute to the ongoing debate in the finance literature about the impact of the quality of investor protection on corporate behaviour and performance.
In this article, I present the results of my own recent study that provides new insights into the corporate motives for spin-offs. I argue that one of the most important reasons for spinning off a ...business segment by a multi-segment firm is to facilitate the company’s ability to pursue acquisitions. More specifically, the establishment of the spin-off common stock as a separate publicly-traded equity is expected to provide the spun-off firm with enhanced M&A opportunities by using its stock as an acquisition “currency.” Potential M&A targets may be more interested in accepting like-kind pure-play stock currency of the separated spun-off firm instead of stock consideration of a diversified multi-segment firm. Second, additional acquisitions made on behalf of one of the business segments within the multi-segment structure could create an imbalance within a portfolio of existing businesses with similar growth potential.
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