Browsing by Subject "Investment"
Now showing 1 - 14 of 14
- Results Per Page
- Sort Options
Item Essays in international corporate finance(2011-05) Riutort, Julio César; Almazan, Andres; Abrevaya, Jason; Alti, Aydogan; Drexler, Alejandro; Sialm, Clemens; Titman, SheridanThis dissertation consists of three essays in international corporate finance. It studies the impact of aggregate conditions and the institutional environment on the behavior of publicly traded firms from a broad sample of countries. In the first essay I argue that when credit constraints are widespread, as may be the case in countries with poor investor protection, we should not necessarily expect small firms´ investment to be more sensitive to monetary contractions or negative aggregate shocks. A simple model of investment with credit constraints shows that for this pattern to occur we need a high enough level of investor protection. The empirical evidence is broadly consistent with the hypothesis. In periods of tight credit conditions, small firms from countries with high creditor protection contract their investment rate more than large firms, while there is no significant difference in the investment contraction of small and large firms in from low creditor protection countries. In the second essay I explore to what extent the effect of legal origin on payout policy, ownership concentration, and valuation has been stable through time. The results suggest that previously established results should be taken with caution, and cast doubts on their strength. In particular, it appears that corporate characteristics are converging across countries, and legal origin is not longer an important determinant of them. In the final essay I study to what extent capital raising in international markets is related to firms´ ability to react to financial shocks. I provide a complete descriptive picture of the main patterns in the use of international financing between 1990 and 2009,study how issuers and non-issuers grow during financial crises, and how their growth is related to the aggregate conditions in the economy and their past financing behavior. Firms that raise capital internationally have a lower correlation with the local GDP growth, and grow more during local financial crises; however this relationship depends on the overall degree of development of the country and is highly dependent on the determinants of the issuance decision. The descriptive analysis show that international capital raising is pervasive in most countries, but the firms doing so differ depending on the development of their country of origin.Item Essays in macroeconomics and finance(2022-04-14) Kroner, Tom Niklas; Coibion, Olivier; Boehm, Christoph; Bhattarai, Saroj; Neuhann, DanielMy dissertation consists of three independent chapters focusing on empirical questions in macroeconomics and finance. In Chapter 1, I study the role of firms’ uncertainty in the transmission of forward guidance to investment. To do so, I employ a quarterly firm-level panel of U.S. publicly traded firms. I measure forward guidance shocks based on unexpected changes in the slope of the yield curve in a 30-minute window around Federal Reserve announcements. I show that firms which are more uncertain adjust their investment as if they are more pessimistic. More uncertain firms adjust their investment relatively more downward for expected monetary tightenings and relatively less upward for expected loosenings. To explain my empirical findings, I construct a New Keynesian model with a high-uncertainty and a low-uncertainty sector. Agents in the high-uncertainty sector are ambiguous (Knightian uncertain) about the informativeness of forward guidance, and choose to take a pessimistic stance due to their ambiguity aversion. The model implies that expansionary forward guidance is less powerful in recessions due to a larger share of uncertain agents. In Chapter 2, joint with Christoph Boehm, we provide evidence for a causal link between the US economy and the global financial cycle. Using a unique intraday dataset, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, the VIX, and commodity prices all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large—often comparable in size to the response of the S&P 500. Further, US macroeconomic news frequently explains more than 15% of the quarterly variation in foreign stock markets. The joint behavior of stock prices and long-term bond yields suggests that systematic US monetary policy reactions to news do not drive the estimated effects. Instead, the evidence is consistent with a direct effect on investors’ risk-taking capacity. Our findings show that a byproduct of the United States’ central position in the global financial system is that news about its business cycle has large effects on global financial conditions. In Chapter 3, joint with Christoph Boehm, we are trying to better understand how FOMC announcements affect the stock market. A large literature uses high-frequency changes in interest rates around FOMC announcements to study monetary policy. These yield changes have puzzlingly low explanatory power for the stock market—even in a narrow 30-minute window. We propose a new approach to test whether the unexplained variation represents monetary policy news or just noise. In particular, we allow for a latent “Fed non-yield curve shock”, which we estimate via a heteroskedasticity-based procedure. Using a test for weak identification, we show that our shock is well identified, that is, the unexplained variation is not just noise. We then go on to show that the shock, signed to increase stock prices, leads to sizable declines in the equity and variance premium, an increase in the 10-year term premium, an increase in short-run inflation expectations, as well as a dollar depreciation against multiple non-safe-haven currencies. Hence, the evidence supports the interpretation that the shock affects risk-appetite and leads to a reverse “flight-to-safety” effect. Lastly, using a method from the computational linguistics literature, we show that our shock can be linked to specific topics discussed in FOMC statements, suggesting that it reflects written communication by the Federal Reserve.Item Essays on banking and corporate investment(2011-08) Wardlaw, Malcolm Ian; Titman, Sheridan; Alti, Aydogan; Almazan, Andres; Cohn, Jonathan; Hartzell, Jay; Abrevaya, JasonThis dissertation examines issues in banking and the financing of corporate investment. The first chapter investigates the impact of changes in a bank's health on the investment behavior of its current borrowers for a panel of U.S. firms. I find that, after controlling for aggregate credit availability and the condition of outside banks, firms reduce their investment when the health of their primary bank deteriorates. This effect is only present while the firm maintains a borrowing relationship with the bank and does not appear to be driven by changes in region or industry specific investment opportunities. The health of the existing lender is more important for younger, more opaque firms with greater reliance on their primary bank. I also find that this effect became less significant after the early 1990s, suggesting that bank dependence appears to diminish during long periods of stability. However, results from the recent financial crisis show that healthy banking relationships remain very important to U.S. firm investment. The second chapter, adapted from joint work with Richard Lowery, examines the determinants of covenant structure in private debt contracts. While previous studies have demonstrated a relationship between firm characteristics and the overall strictness of loan contracts, few studies have examined why covenants are written on a range of accounting variables and what determines their selective use. Using a simple model of firm investment where firms face uncertain cash flows and investment opportunities, this essay characterizes the conditions under which it is optimal for a debt contract to specify a restriction on investment or to specify a minimum cash flow realization. Consistent with this model, empirical evidence demonstrates that the application of covenants based on these variables is not necessarily monotonic in firm risk. While the financially riskiest firms tend to employ capital expenditure covenants, cash flow and net worth covenants are most common among moderately risky firms with greater profitability and firms with stronger baking relationships. The results also highlight the importance of debt covenants in both mitigating agency frictions and maximizing the value of future private information.Item Essays on energy economics : markets, investment and production(2013-12) Morovati Sharifabadi, Mohammad; Titman, SheridanMy dissertation consists of three distinct but related chapters on Energy Economics and Finance. My first chapter is an empirical evaluation of market conduct in global crude oil markets. "Hotelling rule" states that even in competitive equilibrium, price of an "exhaustible resource" exceeds its marginal cost due to the opportunity cost of depleting the non-renewable resource. This cost is called "scarcity rent". Oil price exceeds its marginal extraction cost significantly. This can be attributed to two different sources: effect of scarcity of oil on prices or exercising market power by OPEC (collusion). In this paper, I use Porter (1983) approach considering the possibility of "scarcity rent" component involved in the gap between price and marginal extraction cost in the oil market. The novelty of my approach is to empirically estimate scarcity rent using data on cost of production of oil. Two benchmark cases, where scarcity rent is either zero (non-exhaustible resources hypothesis (Adelman 1990)) or equal to minimum price-cost margin are considered. The results show that in both cases OPEC failed to cooperate effectively and in second case, market conduct estimated is closer to Cournot behavior. In the second chapter of my dissertation, we employ a real options approach to evaluate oil and gas companies' investment decisions in an empirical setup. We develop a theoretical model to derive testable predictions. A unique measure of investment costs is obtained from energy industry data vendors. This novel dataset contains details of contract terms and pricing for offshore drilling equipment, which constitute the major share of investment costs in offshore oil field development. The investment database is combined with financial and macroeconomic data, which enables us to perform a panel data analysis of investments' response to variations in investment costs and market variables such as the slope of futures curve, firms' past earnings, cost of capital and implied oil price volatility. Our results show that the larger firms, facing less financial friction, are more forward looking while the smaller firms, who have less access to capital markets, are more dependent on their past earnings. The third chapter of my dissertation is about the effect of recent natural gas production boom on U.S. manufacturing. Natural gas production in North America has increased significantly over the past decade causing the prices to plunge during past 5 years. The purpose of this research is to investigate the effect of low natural gas prices on energy intensive U.S. manufacturing industries using market data. I empirically evaluate the stock market reactions of publicly traded companies in energy intensive industries to arrival of new information about the unexpected price shocks in natural gas futures markets. My results show that the stock market does not react significantly to innovations in the expected price of natural gas, proxied for by monthly changes in natural gas futures contracts with a fixed maturity date. I then split the sample into two groups based on their expenditure on natural gas as a ratio of their total production value. The stock market valuation of companies in high "natural gas intensity" industries were positively affected by unexpected downward shocks in natural gas prices and the results are significant.Item Essays on information and financial frictions in macroeconomics(2023-04-20) Rezghi, Abolfazl; Bhattarai, Saroj, 1981-; Coibion, Olivier; Eusepi, Stefano; Afrouzi, HassanThis dissertation examines how information and financial frictions impact firms' investment decisions and shape the effectiveness of monetary policy. The first chapter studies the response of high and low credit quality firms to expansionary monetary shocks. According to the findings, high credit quality firms respond to an expansionary shock by increasing their investment, inventory, and sales, whereas low credit quality firms experience a decrease in these variables. Moreover, their financing behavior differs, with high credit quality firms raising funds through equity while low credit quality firms are unable to issue equity or debt. To provide a theoretical explanation for these findings, a simple model is constructed with two types of firms: financially constrained firms and unconstrained firms. Financially constrained firms face a trade-off in allocating their limited funds between wage payments and investment, while unconstrained firms have greater financial flexibility. As a result of an expansionary shock, an increase in wages affects constrained firms disproportionately, leading them to cut their investment to cover the additional labor costs. Furthermore, constrained firms, due to their limited collateral, have to reduce their debt, which aligns with the empirical observations. The second chapter examines the interaction between information and financial frictions and its implications for the investment channel of monetary policy. In a model with inattentive firms facing financial frictions, constrained firms are more attentive to monetary policy as they attempt to avoid financial costs, creating a new channel for financial frictions to affect price rigidity. Since the level of price rigidity is one of the determinants of the outcome of the monetary policy, the model suggests that the investment channel of monetary policy hinges on the interaction between financial frictions and rational inattention. The research provides empirical evidence that supports the predictions of the model. Firstly, the study uses firms' expectation surveys and, taking size as a proxy for financial constraint, finds that smaller firms have more precise nowcasts and forecasts of aggregate variables. Additionally, these firms are more willing to pay for professional forecasts. Secondly, the research employs firms' balance sheet data and a proxy for aggregate attentiveness to demonstrate that higher information rigidity leads to a sluggish and dampened aggregate investment response to monetary shocks, as predicted by the model. The third chapter finds that a contractionary monetary shock would increase the number of defaults and the aggregate liability of defaulted firms in the economy. Using a DSGE model with financial intermediaries, I show that a higher rate of default negatively impacts the balance sheets of banks and leads to a decrease in the supply of credit and a rise in the interest rate of loans. This further increases the cost of production, forcing more firms to file for bankruptcy. The study demonstrates that monetary policy can effectively dampen this amplification mechanism by considering the default rate in the policy rule, thereby ensuring a more stable economic environment.Item Essays on international trade and intergenerational human capital transmission(2010-05) Cengiz, Gulfer; Freitas, Kripa M.; Corbae, Dean; Kuruscu, Burhanettin; Ramondo, Natalia; Alti, AydoganFirst chapter aims to quantify the role of trade in capital goods in cross country income differences. I construct a multi-country general equilibrium model of trade along the line of Eaton and Kortum (2002) and Alvarez and Lucas (2007) and introduce trade in capital goods and capital accumulation. In this framework, comparative advantage and the costs of international trade determine the pattern of production, specialization, and trade. I calibrate the model for 53 countries by estimating trade barriers and calibrating productivity parameters to match the bilateral trade data in 1996. The model is used to analyze full trade liberalizations. I find that removing barriers on investment goods accounts a large portion of reducing cross-country income differences and welfare gain. Counterfactual exercises suggest that developing countries gain relatively more than developed countries. In the second chapter, I focus on the impact of free trade on exportimport ratios in two different sectors. I employ a multi-country general equilibrium model of bilateral trade patterns along the line of Eaton and Kortum (2002) and Alvarez and Lucas (2007). I calibrate the model for 20 countries by estimating trade barriers and calibrating productivity parameters to match the bilateral trade data in 1996. The model is used to analyze full trade liberalizations. The impacts of free trade are predicted to be an increase in the export-import ratios in the comparative advantage sector and a decline in the comparative disadvantage sector, on average. In developing countries the average percentage change in export-import ratios exceeds the average percentage change in export-import ratios in developed countries. Finally, in the third chapter, I focus on the intergenerational human capital transmission. I develop and calibrate a theoretical model that considers three mechanisms of intergenerational transmission of human capital: (i) persistence in learning ability; (ii) parental investment in child’s human capital; (iii) higher teaching productivity of parents with more human capital. Within this framework, I find that (i) and (ii) plays important roles while (iii) does not. In addition the model generates the documented fact that higherwage parents spending more time teaching their children in spite of the higher opportunity cost. I asses the role of nature and nurture effects in intergenerational persistence of earnings and I find that nature accounts a large portion of the intergenerational persistence in earnings. I also quantify the relative importance of these mechanisms on wage inequality.Item Essays on investment in the hotel industry(2019-05-06) Kuo, Fang-Chang; Miravete, E. J. (Eugenio J.); Ackerberg, Daniel; Town, Robert; Duan, JasonThis dissertation studies issues on investments in the hotel industry. The first two chapters empirically investigate the relationship between investment and competition. My study shows that competition negatively impacts firms' investment decisions. The third chapter focuses on the reputation effects on hotel investment, and shows that better online ratings are associated with lower investment expenditures. In the first chapter, I use data from Taiwanese hotel industry to investigate the relationship between competition and investment in a reduced-form analysis. Competition intensity is measured by the number of hotels in a market. Regression analysis indicates that investment is negatively correlated with the number of hotels. I then use a structural model of demand to recover unobserved demand shocks and control for future demand shocks in regression analysis. The results also show a negative relationship. The second chapter develops a dynamic model of investment and entry and conducts four counterfactual experiments to analyze competition policies and long-run equilibrium investments. Hotels make static pricing, and dynamic investment decisions in every period. Potential entrant could enter a market by comparing entry cost and value function of an incumbent. My counterfactual experiments show that competition effects from entry reduce the return from investment and weaken investment incentives. Reducing entry cost by 20% actually leads to 13% decrease in average investments, and thus average unobserved qualities decrease. Consumers still benefit from increased product variety and lower prices. The net changes in consumer surplus are positive. However, ignoring the negative competition effects on investments will overestimate consumer surplus under such a policy. In my third chapter, I investigate the impact of reputation on investment in Taiwanese hotel industry. Specifically, how do reputation affect endogenous product characteristics, quality, through investment decisions? The empirical strategy consists of a reduced-form analysis. I supplement the hotel financial performance data with with a panel of consumer ratings from major review platforms: TripAdvisor, Agoda, Expedia, and Bookings.com. The regression results indicate that hotels with better online ratings tend to invest less or less frequently. Controlling for past investments also show similar resultsItem Essays on real options and strategic interactions(2012-08) Dehghani Firouzabadi, Mohammad Hossein; Boyarchenko, Svetlana I.; Almazan, Andres; Stinchcombe, Maxwell B.; Tompaidis, Stathis; Wiseman, ThomasChapter 2 considers technology adoption under both technological and subsidy uncertainties. Uncertainty in subsidies for green technologies is considered as an example. Technological progress is exogenous and modeled as a jump process with a drift. The analytical solution is presented for cases when there is no subsidy uncertainty and when the subsidy changes once. The case when the subsidy follows a time invariant Markov process is analyzed numerically. The results show that improving the innovation process raises the investment thresholds. When technological jumps are small or rare, this improvement reduces the expected time before technology adoption. However, when technological jumps are large or abundant, this improvement may raise this expected time. Chapter 3 studies technology adoption in a duopoly where the unbiased technological change improves production efficiency. Technological progress is exogenous and modeled as a jump process with a drift. There is always a Markov perfect equilibrium in which the firm with more efficient technology never preempts its rival. Also, a class of equilibria may exist that lead to a smaller industry surplus. In these equilibria either of the firms may preempt its rival in a set of technology efficiency values. The first investment does not necessarily happen at the boundary of this set due to the discrete nature of the technology progress. The set shrinks and eventually disappears when the difference between firms’ efficiencies increases. Chapter 4 studies the behavior of two firms after a new investment opportunity arises. Firms either invest immediately or wait until market uncertainty is resolved. Two types of separating equilibrium are possible when sunk costs are private information. In the first type the firm with lower cost invests first. In the second type the firm with higher cost invests first leading to a smaller industry surplus. The results indicate that the second type is possible only for strictly negatively correlated sunk costs. Numerical analysis illustrates that when first mover advantage is large, the firm that delays the investment should be almost certain about its rival’s sunk cost. When market risk increases, the equilibria can exist when the firm is less certain.Item Goals as content-specific standards for evaluation of romantic commitment(2013-08) Tennant, Patrick Solis; Gleason, Marci Elizabeth JoyThis thesis examines the association between the role that an individual’s partner and relationship alternatives play in his or her goal pursuits and the individual’s commitment to his or her relationship. Individual’s preference for others that aid in the achievement of his or her goals has been theoretically and empirically established (Fitzsimons & Shah, 2008). This thesis extends that work by examining the relation between multiple interpersonal dimensions of an individual’s goal pursuits and his or her romantic commitment. Rusbult’s (1980) investment model was used as a framework to develop a questionnaire that examined the degree to which an individual believed his or her partner facilitated, impeded, shared, and valued his or her goals, as well as whether the individual could accomplish the goal without his or her partner or if anyone other than his or her partner could help him or her to achieve the goal. It was hypothesized that individuals who believe that their partner facilitates and shares their goals, and that their alternative partners do not facilitate their goals, will be more committed to their relationship. These hypotheses were tested with a survey that asked participants to list three of their personal goals and rate each of them on the six interpersonal goal dimensions, as well as complete measures of relationship satisfaction, investment, alternatives, and commitment. Participants were recruited and responded to the survey through the Amazon.com Mechanical Turk marketplace. The final sample included 475 individuals that were involved in a romantic relationship at the time survey. Two structural equation models were constructed to analyze the data. Primary findings show significant associations between several of the interpersonal goal dimensions and the constructs of the investment model. Results are addressed in the context of the relevant literature, with relationship evaluation serving as the suggested mechanism. Implications and future directions are then discussed.Item How perceptions impact real estate decisions : an analysis of residential demand in Austin, Texas(2015-12) Fulmer, Kristen Alyse; Atkinson, Simon, Ph. D.; Wegmann, JacobThis thesis examines how social media trends create perceptions, which influence real estate decision-making within the Millennial generation, ultimately affecting their long-term investment and longevity in the city of Austin, Texas. To investigate the residential real estate market in Austin, specifically within the Millennial generation, I discuss decision factors with the residents and developers, known as stakeholders. By completing a mixed-methods analysis, I determine how Internet-based tendencies affect perceptions and economic realities of specific neighborhoods or the city, thereby affecting the residential real estate market as a whole. Approaching this research as a post-positivist, I hypothesize that the Millennial cohort is currently creating short-term demand for residential development with no long-term intentions of staying in the city. By discovering this future instability of sectors within the Millennial generation, especially in newcomers to the city, I question Austin’s plans, which seem to lack amenities to provide for this cohort’s residential longevity.Item Intellectual property allocation and firm investments in innovation(2017-05-04) Liu, Zesong; Titman, Sheridan; Cohn, Jonathan B.; Alti, Aydogan; Fracassi, Cesare; Trejo, StephenSuccessful innovations are achieved by combining employee ingenuity with firm resources. However, firms will suppress investment if employees can easily leave the firm and take these innovations with them. I provide new evidence on how changes to employee outside options impact innovation incentives using state court decisions to adopt the Inevitable Disclosure Doctrine (IDD), which strengthens firm trade secret protections by limiting employee mobility. I find that IDD adoption leads to an increase in innovation output and investment in high technology industries, where employee outside options are higher, but not in low technology industries. Furthermore, I find that these firms are able to hire talented employees. These results show that decreasing the ability of employees to leave the firm in high technology industries can be mutually beneficial.Item Investment or hegemony : language equity in a two-way dual language classroom(2013-05) Thomei, Marissa De Jesus; Palmer, Deborah K., 1969-This ethnographic case study is situated in a suburban elementary school’s third grade Two-Way 50:50 Dual Language immersion model in Central Texas. Interviews, surveys and observations were conducted to examine the students’ use of the two languages targeted in the Dual Language Immersion program, English and Spanish. Drawing on the notion of “investment” (Norton, 2000) and Bourdieu’s theory of “cultural and linguistic capital” (Bourdieu, 1986), this research studies the language use of six students representing the two language groups in the program. In the data analysis, the researcher finds that the notion of investment is consistent in all the participants, although the aspect that they choose to invest in varies and is represented in their culture, language and identity.Item Language learning, identity, and agency : a multiple case study of adult Hispanic English language learners(2014-05) Sacchi, Fabiana Andrea; Urrieta, LuisFor the past 30 years, researchers in the field of Second Language Acquisition (Block, 2007; Lantolf and Pavlenko, 2001; Norton, 2000) have emphasized the need to integrate the language learner and the language learning context and to analyze relations of power and how they affect the language learner, the language learning processes, and the learner’s identities. Several researchers (Lantolf & Pavlenko, 2001; McKay & Wong, 1996; Skilton-Silverstein, 2002; Vitanova, 2005) have studied the connections between language learning, identity, and agency. The participants in these studies were immigrants from Eastern Europe, Asia, or Africa living in the U.S., Canada, and Australia. Few studies (Menard-Warwick, 2004, 2009) have analyzed the experiences of adult Hispanic immigrants in the U.S. in relation to English learning and identity construction. This dissertation reports on a study exploring how five adult Hispanic immigrants learning English in a major city in Texas negotiated their identities as English speakers and exercised agency in contexts where English was spoken. The study also analyzed the learners’ investment in learning English. The sociocultural theory of self and identity developed by Holland, Lachicotte, Skinner, and Cain (1998) was the framework which helped conceptualize identity and agency. The work of Norton (2000) on language learning and identity and her notion of investment were used to understand the participants’ experiences learning and using English inside and outside the ESL classroom. A qualitative multiple-case study was conducted to understand the experiences of the participants who were learning English in a community-based ESL program, where the researcher became a participant observer during the six months of data collection. The findings of the study show the complex identity negotiations that the participants underwent in the different contexts where they interacted in English. Social class, immigrant status, and other social factors, such as lack of access to English-speaking contexts, high prevalence of Spanish in contexts where the participants interacted daily, and positioning of the participants (by others and by themselves) as limited English speakers strongly influenced how they negotiated their identities as English speakers. Despite these social factors, the participants exercised agency and were highly invested in learning English.Item Potholes on China's. New Silk Road: An Analysis of Chinese Aid and Investment in South Asia(2019-12) Evans, JoshuaFor centuries, the Indian Subcontinent has played a role as a crossroads of East and West and as a geopolitical kingmaker, encouraging trade but also representing the wealthiest region ever to be conquered. In the 21st Century, the emerging global power of China has rapidly increased their aid and investment in South Asia, forging stronger economic ties with past partners and upending decades of alliances with other powers. This thesis focuses on the motivations, decisions, and outcomes of Chinese financial flows into South Asia, analyzing the degree that Chinese investment matches governmental claims of motive and how the geopolitical landscape is changing in response to Chinese money. Split into four sections, the thesis first provides justification for focus on the importance of South Asia and the unique nature of Chinese aid and investment, particularly with respect to China's One Belt, One Road Initiative. Next, the thesis overviews past literature on antecedents, decisions, and outcomes of Chinese investment, providing background to qualitative changes the tests run in this thesis. Thirdly, the thesis runs regressions and tests to provide greater clarity to the motivations behind Chinese investment. The final chapters examine case studies of the two largest recipients of Chinese investment, Pakistan and Sri Lanka, and explore how the investment patterns and political outcomes of these two countries are reflected across many recipients of Chinese money, and how these outcomes have called into question the success of the One Belt, One Road Initiative. This research relies on data collected by AidData at the College of William & Mary and the goal of this thesis is to call into question the state of literature and differing narratives regarding Chinese investment by providing quantitative evidence for or against certain claims.