A lockup contract is an agreement between initial shareholders and the underwriter that prohibits initial shareholders from selling any of their shares of stock for a specific period of time after the IPO. The existence of lockup agreements is to reduce the chance of issuers taking advantage of insider information, allowing more time for outside investors to resolve uncertainty in firm value without the adverse effect of insider selling. However, lockup agreements are much more diverse in Europe than in the U. S. both in terms of the amount and length of equity shares locked up after the IPO.
The U. S. lockup agreements are voluntary and mostly standardized towards 180 days while they are frequently mandatory and involved in much longer periods in Europe. Another important feature of lockup agreements is the negative stock price reaction around the lockup expiry date which has been documented by numerous researchers recently. This effect is contradictory to the efficient market hypothesis which advocates that the IPO prospectus should reveal all information pertinent to the determinant of stock price.
Most importantly, there are also separate lockup agreements for different categories of initial shareholders within the same firm such as directors and venture capitalists. As directors assume important leadership roles and they are more informed than other shareholders, thus the information asymmetry tends to be higher between directors and outside investors than between venture capitalists and outside investors. However, venture capitalists are repeat investors who have valuable reputation at stake which may limit their conflict of interests with outside investors acquiring shares in the IPO.
Outside investors may not purchase shares in the IPO backed by venture capitalists who were previously involved in taking advantage of insider information and reducing the wealth of outsider investors. Besides venture capitalists also use IPO as an exit mechanism to optimally recycle investments and maximize future returns. Hence the length and expiry of directors’ lockup agreements will convey significantly different information than the length and expiry of venture capitalists’ lockup agreements. Important Literatures Aggarwal, R. , Krigman, L.
and Womack, K. , 2002, “Strategic IPO Underpricing, Information Momentum, and Lockup Expiration Selling”. Journal of Financial Economics 66, 105 – 137. Brav, A. and Gompers, P. , 2003, “The Role of Lockups in Initial Public Offerings”. The Review of Financial Studies 16, 1 – 29. Cornell, B. and Sirri, E. , 1992, “The Reaction of Investors and Stock Prices to Insider Trading”. The Journal of Finance 47, 1031 – 1059. Field, L. and Hanka, G. , 2001, “The Expiration of IPO Share Lockups”. The Journal of Finance 56, 471 – 500. Gompers, P. and Lerner, J.
, 1998, “Venture Capital Distributions: Short-Run and Long- Run Reactions”. The Journal of Finance 53, 2161 – 2183. Lakonishok, J. and Lee, I. , 2001, “Are Insider Trades Informative”. The Review of Financial Studies 14, 79 – 111. Lin, T. and Smith, R. , 1998, “Insider Reputation and Selling Decisions: The Unwinding of Venture Capital Investments during Equity IPOs”. Journal of Corporate Finance 4, 241 – 263. Ofek, E. and Richardson, M. , 2000, “The IPO Lock-Up Period: Implications for Market Efficiency and Downward Sloping Demand Curves”. Unpublished working paper, New York University. Ofek, E.
and Richardson, M. , 2003, “DotCom Mania: The Rise and Fall of Internet Stock Prices”. The Journal of Finance 53, 1113 – 1137. Schultz, P. , 2008, “Downward Sloping Demand Curve, the Supply of Shares, and the Collapse of Internet Stock Prices”. The Journal of Finance 63, 351 – 378. Master Thesis topic 2: Bank Risk Management Banks play a crucial role in the economy. They lend to agents who need capitals to finance their long term projects. This lending activity is financed with short term deposits put in their account in exchange of different financial services banks are able to provide.
The balance sheets of banks are structured on the asset side with long terms loans funded on the liability side with short term deposits, debts raised on the financial markets (bonds) and on the interbank market, and finally equity provided by shareholders. Banks are also real “risk machine”. The mismatch between lending long and borrowing short (deposits) exposes them to interest risk. But bank credit portfolio is confronted with different kind of risks among which the risk of non reimbursement or default of the borrower (credit risk) is the most essential nowadays.
So screening and monitoring their borrower is an important dimension of their activity and also a source of information asymmetry over the financial market. A loss of confidence can also threaten the sources of bank funding. Massive withdrawals on deposits or freezes of interbank loans can lead the bank to severe liquidity problems and worse to an insolvency situation. Bank equity is therefore the only stable resource which can be used in the different situations of financial disaster. That is why Regulation Authorities (Basel Committee) have progressively enforced the banking system as a whole to hold a minimum capital level.
(For more information: see in www. bis. org). Different studies can be conducted here: -How do banks adjust their capital ratios? -What is the link between the “business cycle” and the amount of bank capital (procyclicity effect)? -Why do banks hold capital well in excess of the minimum capital required by the regulation (capital buffer)? Although the first goal of this capital constraint is to ensure the soundness of the bank individually, the recent subprime mortgage crisis has clearly revealed a big drawback.
Large losses due to the default on loan reimbursements have lowered dramatically the capital forcing banks to reduce their lending activity. Some interesting issues are: -How do banks adjust their risk-taking behaviour in their loan extension process? -What effect has the use of credit derivatives and/or credit securitization on the bank lending activity? -What is the role of credit securitization on banking risk measured by its “equity beta”? Some introducing references are: -Allen Berger & Richard Herring & Giorgio Szego, “The role of capital in financial institutions”, Journal of banking and finance 1995.
-Terhi Jokipii & Alistair Milne, “The cyclical behavior of European bank capital buffers”, Journal of banking and finance, 32, 2008. -Leonardo Gambacorta & Paolo Emilio Mistrulli, “Bank capital and lending behavior: Empirical evidence for Italy”, Banca d’Italia research department, February 2003. -Dennis Hansel & Jan-Peter Krahnen, “Does credit securitization reduce bank risk? Evidence from the European CDO market”, January 2007, available on: http://ssm. com/abstract=967430 -Joe Peek & Eric Rosengren, “Bank regulation and the credit crunch” Journal of banking and finance, 19, 1995.
-Christina Bannier & Dennis Hansel, “Determinants of banks’ engagement in loan securitization”, August 2007, available on: http://ssm. com/abstract=1014305. -Benedikt Goderis & Ian Marsh & Judit Vall Castello & Wolf Wagner, “Bank behavior with access to credit risk transfer”, Bank of Finland Research, Discussion paper 4/2007. Master Thesis topic 3: The Ambiguous Role of Credit Ratings Ratings are tools provided to evaluate the chance investors have of receiving interest and principal repayments on a debt as scheduled in the involved contract issued by the borrower.
Three rating agencies Standard & Poors, Moody’s and Fitch have developed or improved specific quantitatives models to assess the credit quality of a borrower. Their importance has grown considerably those last years. Since 1980s, in order to keep the soundness of the banking system threatened by several crisis and bankruptcies, official regulatory authorities have stengthened the banking regulation. On a daily basis banks must continuously adjust their capital according to the riskiness of their assets. But since Basel II they are constrained to assess regularly the default risk of their credit portfolio (see on www.
bis. org) In reaction banks have developed new strategies and financial products in order to alleviate this capital constraint and diversify their lending activity. Credit derivatives and structured products based on securitization mecanism have been widely used in this process. Structured products involves the pooling of assets and the subsequent sale to investors of tranched claims on the cash flows backed by these pools. Each tranche has a specific rating given by one of the three agencies. But the recent subprime crisis have shown the limits and the fragility of a system completely dependent on the rating system.
and rating agencies have been widelly criticized. Several researches are proposed here: -Are rating agencies “fair” in their credit notations? -Is there a cyclical pattern in the credit rating reevaluations? -Are credit ratings foreseeable? -What is the impact of credit ratings on the evaluation of the pricing of debt instruments or on the issuing corporate or on the structured product concerned -What is the effect of multiple ratings on the pricing of the backet instrument?. Some primary references: -“Structured finance: Complexity, risk and the use of ratings”, Ingo Fender & Jane Mitchell, BIS Quaterly review, June 2005.
“CDO rating methodology: Some thoughts on model risk and its implications”, BIS Working paper N°163, November 2004. “Corporate governance and rating: Do agencies rate mutual bank bonds fairly? ” K. Fisher & R. Mahfoudhi, CREFA Working paper July 2002 -“The effect or credit ratings on credit default swap spreads and credit spreads”, K. Daniels & M. Jensen, The journal of fixed income, December 2005. -“The relationship between credit default swap spreads, bond yields and credit rating announcements”, J Hull & M Predescu & A. White, Journal of banking and finance 2004.
-“Do multiple CDO ratings impact credit spreads? ” S. Morkoetter & S. Westerfeld, Swiss institute of banking and finance University of St Gallen, November 2008. -“The role of ratings in structured finance: issues and implications”, BIS, January 2005. Master Thesis topic 4: Mergers and Acquisitions The vast literature of Mergers and Acquisitions (M&A) deals with issues like the effect of M&A on short/long-run firm performance, the factors for success and failure of M&A, the benefits/losses for the shareholders of the target and/or bidding firm from M&A.
The seminal paper of Jensen and Ruback (1983) who conclude that there is evidence “that corporate takeovers generate positive gains, that target firm shareholders benefit, and that bidding firm shareholders do not lose” and the highly influential article by Roll (1986) who introduces the hubris hypothesis in an attempt to explain some of the empirical findings in this area of research, are just a few excellent examples of this enormous literature. Although many articles are already devoted to this topic, new points of view continue to emerge. In this topic we focus on the effects of and motives for Mergers and Acquisitions.
Possible research ideas include (but are certainly not limited to) * What are the effects/is the synergy of cross-border M&A deals? * Do the empirical findings also hold for non-US data? * What is the impact of legislation (for example Sarbanes-Oxley) on the effects of/motives for M&A? Jensen, M. C. , and R. S. Ruback, 1983, “The Market for Corporate Control: the Scientific Evidence,” Journal of Financial Economics 11, 5-50. Roll, R, 1986, “The Hubris Hypothesis of Corporate Takeovers,” Journal of Business 59, 197-216. Master Thesis topic 5: Trading Volume and Asset Prices
Fundamental shocks to the economy drive both the supply and demand of financial assets and their prices. Thus, any asset-pricing model that attempts to establish a structural link between asset prices and underlying economic factors also establishes links between prices and quantities such as trading volume. In fact, asset-pricing models link the joint behavior of prices and quantities with economic fundamentals such as the preferences of investors and the future payoffs of the assets. Therefore, the construction and empirical implementation of any asset-pricing model should involve both price and quantities as its key elements.
Even from a purely empirical perspective, the joint behavior of price and quantities reveals more information about the relation between asset prices and economic factors than prices alone. Yet the asset-pricing literature has centered more on prices and much less on quantities. For example, empirical investigations of well-known asset-pricing models such as the Capital Asset Pricing Model (CAPM) and its intertemporal extensions (ICAPM) have focused exclusively on prices and returns, completely ignoring the information contained in quantities. This project aims at uncovering valuable information about price
dynamics from trading volume. References: See, for example, Lo and Wang (JFE2000), Lo and Wang (JF2006), Cremers and Mei (RFS2008) Master Thesis topic 6: Liquidity in Asset Markets Liquidity concerns the ease and cost at which investors can trade assets in the marketplace. Traditionally, most literature on liquidity was in the field of market microstructure, which focuses on the sources of (il)liquidity. In this literature, asymmetric information, inventory costs and market designs can generate limited liquidity. However, liquidity itself can also affect asset prices.
It requires little imagination to see that investors typically prefer liquid over otherwise identical illiquid securities. Consequently, the liquid asset will have a higher price and thus a lower expected return. Moreover, if liquidity varies over time, investors will be exposed to liquidity risk. Depending on the sign of the correlation of liquidity innovations with returns, this can amplify or reduce the total risk exposure of an investor. One difficulty about liquidity is that it is hard to measure and has different dimensions. The marginal trading cost and the market depth are both aspects of liquidity.
The first is relatively easily measured by the bid-ask spread (but this is not always available, especially in OTC markets), the latter one is typically measured by Amihud’s (2002) ILLIQ, which is a reasonable measure of market depth. In this topic students can work on several aspects of liquidity, both on the market microstructure side as well as on the asset pricing side. Possible research questions are: * How related are different aspects and measures of liquidity in the cross-section and time series dimension? * Is there commonality in liquidity of different asset markets? * How much of the small-value premium is due to liquidity?
* How does individual and market-wide liquidity react to specific events like the Ford/GM downgrade and why? * What is the effect of short selling restrictions on liquidity? * Are hedgefunds with a lockup period/liquidation lag less liquid and more exposed to liquidity risk? * Can liquidity explain pricing differences in stock pairs? * What happened to liquidity in the financial crisis and why (possible for several markets)? Some references: Market Microstructure: * Glosten, L. and Milgrom, P. , (1985), “Bid, Ask, and Transaction Prices in a Specialist Market With Heterogeneously Informed Traders”, Journal of Financial Economics 14, 71-100.
* Kyle, A. , (1985), “Continuous Auctions and Insider Trading”, Econometrica 53, 1315-1335. * Roll, R. , (1984), “A simple Implicit Measure of the Effective Bid – Ask Spread in an Efficient Market”, Journal of Finance, 39, 1127-1139. * Ho, T. and Stoll, H. (1983), “The Dynamics of Dealer Markets under Competition”, Journal of Finance, 38, 1053—1074. Pricing liquidity: * Amihud, Y. , and H. Mendelson (1986): Asset pricing and the bid-ask spread, “Journal of Finance, 17, 223-249. * Amihud, Y. : 2002, Illiquidity and stock returns: cross-section and time series effects, Journal of Financial Markets 5, 31–56.
* Pastor, L. and Stambaugh, R. : 2003, Liquidity risk and expected stock returns, Journal of Political Economy 111(3), 642–685. * Acharya, V. and Pedersen, L. : 2005, Asset pricing with liquidity risk, Journal of Financial Economics 77, 375–410. * Dick-Nielsen, Jens, Feldhutter, Peter and Lando, David, Corporate Bond Liquidity Before and after the Onset of the Subprime Crisis (February, 09 2009). EFA 2009 Bergen Meetings Paper. Note that capturing the intuition of these papers is most important, not being able to follow every technical derivation.
Master Thesis topic 7: The Role of Corporate Governance in Mergers and Acquisitions There are vast amount of empirical literature documenting that managers conduct bad M&As which destroy shareholder value. For example, Moeller, Schlingemann and Stulz (2005) show shareholder value destruction in a massive scale in the merger wave of late 1990s. Jensen (1986) argues that managers tend to use the firm’s free cash flow to conduct M&As in order to build their own business empire, at the expense of shareholders. In contrast, Roll (1986) argues that managers conduct bad mergers due to their own hubris bias.
A general and very interesting research topic is whether and how corporate governance plays a role in mergers and acquisitions. Can better corporate governance improve the quality of M&As? As there exist a variety of corporate governance mechanisms (such as large shareholder monitoring, corporate board monitoring, and managerial incentive compensation). It will be interesting to investigate the effectiveness of various corporate governance mechanisms in improving M&A performance. For example, possible research ideas include (but certainly are not limited to) * Can the existence of large shareholder(s) improve the firm’s M&A quality?
* Can an effective board structure improve M&A performance? * Can managerial compensation structure affect M&A performance? * Does corporate governance play a different role in Europe than in USA or Asia? * …… The research projects in this area will include extensive data gathering and sound econometric analysis. For the first, experience with online data-gathering, as well as data handling in MS Excel and/or comparable software is advised. For the second, a sound knowledge of statistics, with confidence in regression models, is suggested. Proposed software includes Eviews, SAS, R or Matlab (MS Excel or SPSS can serve in certain cases).
The project will involve (on a full-time basis): * Month 1: Orientation, literature review, formulation of research objective. Write up of Chapter 1. * Month 2: Derivation of methodology: leads to thesis proposal. Write up of Chapter 2. * Month 3: Data gathering and preliminary analysis. Write up of Chapter 3. * Month 4: Quantitative analysis. * Month 5: Writing of remaining chapters and submission. * End of month 6: Defence Jensen, M. C. , 1986, “Agency Cost Of Free Cash Flow, Corporate Finance, and Takeovers”, American Economic Review, 76(2): 323-329. Moeller, S. , F. Schlingemann, and R. Stulz, 2005. ‘Wealth Destruction on a Massive Scale?
A Study of Acquiring-Firm Returns in the Recent Merger Wave’, Journal of Finance vol. 60(2): 757-782. Roll, R, 1986, “The Hubris Hypothesis of Corporate Takeovers,” Journal of Business 59: 197-216. Master Thesis topic 8: The Risk of Corporate Fraud and Capital Market Consequences It is well known that investors incur disastrous losses if a firm is detected of committing fraudulent misreporting (e. g. , Anron and Worldcom). Extant corporate finance theories also suggest that the incidence of fraud tends to exhibit industry and time-series clustering effects (e. g. , Povel, Singh and Winton 2007, Qiu and Slezak 2008).
Therefore, it may not be unreasonable for one to perceive the risk of being detected of committing fraudulent misreporting (the risk of detected fraud hereafter) as a systematic risk born by investors. If so, rational investors may require a risk premium for having to bear this risk. A general and very interesting research topic is whether the (perceived) risk of detected fraud increases the cost of capital of a firm, and if yes, by how much. Research in this area will greatly deepen our understanding of the real consequences of corporate fraud. Specifically, * Does (perceived) higher risk of detected fraud increase the firm’s cost of equity?
* Does (perceived) higher risk of detected fraud affect the firm’s credit ratings given by the rating agencies, thus increase the firm’s cost of debt (yield of maturity) in the bond market? * Does (perceived) higher risk of detected fraud increase the firm’s interest rates for bank loans? * … … The research projects in this area will include extensive data gathering and sound econometric analysis. For the first, experience with online data-gathering, as well as data handling in MS Excel and/or comparable software is advised. For the second, a sound knowledge of statistics, with confidence in regression models, is suggested.
Proposed software includes Eviews, SAS, R or Matlab (MS Excel or SPSS can serve in certain cases). The project will involve (on a full-time basis): * Month 1: Orientation, literature review, formulation of research objective. Write up of Chapter 1. * Month 2: Derivation of methodology: leads to thesis proposal. Write up of Chapter 2. * Month 3: Data gathering and preliminary analysis. Write up of Chapter 3. * Month 4: Quantitative analysis. * Month 5: Writing of remaining chapters and submission. * End of month 6: Defence Poval, P. , R. Singh, and A. Winton, 2007. “Booms, Busts, and Fraud”. Review of Financial Studies, 20(4): 1219-1254.
Qiu, B. and S. L. Slezak, 2008. “The Strategic Interaction between Committing and Detecting Fraudulent Reporting”. Working paper, SSRN. Master Thesis topic 9: Credit Derivatives The market for credit default swaps (CDS) has been growing dramatically and trading remained relatively liquid even during the on-going crisis (Fitch 2009). The buyer of a CDS has to pay a compensation, called the CDS spread, to the seller who provides insurance against a set of pre-defined default events of the reference entity. The CDS spread represents the cost of hedging against the reference entity’s risk of default.
The CDS market is focused on issuer default risk and main participants are large banks, insurance companies, and hedge funds. Interestingly, little is known about the informational efficiency of CDS markets. Issues related to information processing are of key importance for the market participants trading motives and the implementation of their strategies (e. g. , hedging, active credit portfolio management, arbitrage, and speculation). For example, the impact of corporate news, ratings announcements, earnings announcements or similar events can be studied in more detail.
The following topics can be considered to conduct research projects that examine the information processing in CDS markets. * Intra-industry contagion in CDS markets * Recovery expectations in CDS markets * Market-implied default risk expectations: The failure of Lehman Brothers References Callen, J. , Livnat, J. , Segal, D. , 2007. The impact of earnings on the pricing of credit default swaps. Working Paper, February 2007. Fitch Ratings (2009): Global Credit Derivatives Survey: Surprises, Challenges and the Future. August 20, 2009. Jorion, P. , Zhang, G.
(2007): Good and bad credit contagion: Evidence from credit default swaps. Journal of Financial Economics 84, 860-883. Jorion, P. , Zhang, G. (2009): Credit Contagion from Counterparty Risk. Journal of Finance, scheduled for publication in October 2009. Knaup, M. , Wagner, W. (2009): A Market-Based Measure of Credit Quality and Banks’ Performance during the Subprime Crisis. European Banking Center Discussion Paper No. 2009-06S. Norden (2008): Credit Derivatives, Corporate News, and Credit Ratings, WFA 2009 San Diego Meetings Paper. Uhrig-Homburg, M. , Schlafer, T.
(2009): Estimating Market-implied Recovery Rates from Credit Default Swap Premia. University of Karlsruhe, Working Paper, May 2009. Master Thesis topic 10: Bank-Borrower Relationships Bank loans represent the main source of external funding for companies and consumers in many countries. The empirical banking research has documented that banks make use of different lending technologies to extend loans to their customers. These lending modes can be classified in “arm’s length lending” and “relationship lending”. The existing studies have addressed some of the benefits and costs associated with different lending modes.
However, there are still many open empirical questions that matter for banks, borrowers, and from a macroeconomic perspective. It is particularly interesting to investigate these questions in the context of the on-going financial crisis that started in August 2007. The topics may also be differentiated by bank, borrower and country characteristics. Several studies can be conducted to address the following questions: * Bank lending behavior and macroeconomic conditions, especially the impact of unemployment and labour market conditions * Has bank lending to firms changed during the crisis?
What happened to credit availability and lending terms? * How is default risk considered in foreign currency lending? Are there differences in the pricing of foreign currency denominated bank loans and bonds of the same borrower? * What are the determinants of stopping, switching, and replacing bank relationships? * Why do firms and/or consumers default? * What determines the bank behavior before/at/after borrower default? When do banks assist their borrowers and when do they “pull the plug”? Investopedia explains ‘Empirical Rule’ The Empirical Rule is most often used in statistics for forecasting final outcomes.
After a standard deviation is calculated, and before exact data can be collected, this rule can be used as a rough estimate as to the outcome of the impending data. This probability can be used in the meantime as gathering appropriate data may be time consuming, or even impossible to obtain References Berger, A. , Udell, G. (2006): A more complete conceptual framework for SME finance, Journal of Banking and Finance 30, 2945-2966. Bharath, S. , Dahiya, S. , Saunders, A. , Srinivasan, A. (2008): Lending relationships and loan contract terms, forthcoming Review of Financial Studies.
Boot, A. (2000): Relationship Banking: What do we know? Journal of Financial Intermediation 9, 7-25. Brown, M. , Ongena, S. , Yesin, P. (2009): Foreign Currency Borrowing by Small Firms, Working Paper, Tilburg University. Davydenko, S. , Franks, J. (2007): Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany, and the U. K. Journal of Finance 63, 565-608. Ioannidou, V. , Ongena, S. (2007): Time for a change: Loan Conditions and Bank Behavior when Firms Switch, Working paper, Tilburg University. Jacobson, T. , Kindell, R. , Linde, J. , Roszbach, K.
(2009): Firm Default and Aggregate Fluctuations, CEPR Discussion Paper No. DP7083. Norden, L. , Weber, M. (2008): Credit Line Usage, Checking Account Activity, and Default Risk of Bank Borrowers, AFA 2008 New Orleans Meetings Paper. Rosenfeld, C. (2006): The Effect of Banking Relationships on the Future of Financially Distressed Firms, Working Paper. Master Thesis topic 11: The Impact of CEO Personal Characteristics on Corporate Finance Decisions A relatively new stream of research in the corporate finance literature is about the impact of CEOs’ personal characteristics on financial decisions.
According to Bertrand and Schoar (2003), managers’ characteristics play an important role in their decisions in the areas of investment, financial and organizational practices. In their survey of behavioral corporate finance literature, Baker, Ruback, and Wurgler (2004) conclude that there are very few behavioral finance studies that examine the CEOs’ perspective. Rather, most such studies focus mainly on investments and financing decisions. Examples of these studies are Heaton (2002) and Malmendier and Tate (2005, 2008), and Xuan (2009).
The topic of this thesis is about the impact of CEOs’ personal characteristics on their corporate decisions. One possibility would be to consider a CEO’s industry working experience or geographical experience. Another possibility is whether they show persistent behavior when working for another firm. Other suggestions are welcome as well. Baker, M. , Ruback, R. , Wurgler, J. , 2004. Behavioral corporate finance. In: Eckbo, B. E. (Eds. ), Handbook in corporate finance: Empirical corporate finance. Bertrand, M. , Schoar, A. , 2003. Managing with style: The effect of managers on firm policies. The Quarterly Journal of Economics 143, 1169-1208.
Heaton, J. , 2002. Managerial optimism and corporate finance. Financial Management 32, 33-45. Malmendier, U. , Tate, G. , 2005a. CEO overconfidence and corporate investment. The Journal of Finance 60, 2661-2700. Malmendier, U. , Tate, G. , 2008. Who makes acquisitions? CEO overconfidence and the market’s reaction. Journal of Financial Economics 89, 20-43. Xuan, Y. , 2009. Empire-building or bridge-building? Evidence from new CEOs’ internal capital allocation decisions. Review of Financial Studies, Forthcoming. Master Thesis topic 12: Corporate finance and governance of Dutch firms in the 20th century
Many studies of corporate decisions focus on recent periods. The corporate decisions include capital structure choice, dividend policy, governance structures and mergers and acquisitions. In the Netherlands many studies have been carried out on these topics for periods starting in the 1980s. In these studies cross-sectional analyses are performed to explain capital structure choice, dividend policy, governance structures and mergers and acquisitions. Alternatively these studies measure the effects of corporate decisions on firm performance. History can add fascinating dimensions in research on corporate decision-making.
First, data over longer time periods allows a study of long term corporate policies of firms. For example, why do some firms have stable dividends while other firms exhibit fluctuating dividends? Or: do long term capital structures move towards optimal ratios? Second: in historical research by nature the institutional setting changes over time. Examples are tax rules, company law and societal perceptions of good governance. These changes make it, for example, interesting to study the relation between the use of takeover defenses in firms and the development of company law.
In the Netherlands, since 1903, a yearly guide is issued with information about all Dutch exchange-listed companies: Van Oss Effectengids. This