What is the relationship between investor protection legislation and target takeover returns? Evidence from Europe

We show that investor protection legislation is an important determinant of the returns of target companies that are subject to takeovers within Europe. Announcement and post-announcement returns are higher in strong investor protection countries, which indicates that bidders are forced to offer larger premiums when the original offer is made, and are more likely to have to revise their offer higher before a takeover is successful. This is consistent with targets having relatively greater bargaining power in strong investor protection environments. Our findings are robust to the inclusion of common determinants of takeover returns.     

Integrated Risk Management and the Role of the Risk Manager

ABSTRACT: Although the transferring of a firm's pure risk historically has been conducted through the insurance and reinsurance markets, risk managers of large corporations are reportedly becoming more sophisticated with regard to their risk financing strategies. This increased sophistication has come in the form of greater use of techniques such as captives, finite risk insurance, financial reinsurance, and risk retention groups. The purpose of this study is to assess the characteristics and extent of integrated risk management. Using survey data, we evaluate several aspects of risk management integration, including (1) the extent to which risk managers are involved in managing both pure and financial risks facing their firms, (2) the nonoperational types of risks handled by risk managers and the techniques being used to handle a broader set of risks, and (3) the effect that factors such as the size of the firm, the firm's industry, and the background and training of the risk manager has on participation in integrated risk management activities.     

Tighter Option Bounds from Multiple Exercise Prices

Optionbounds are determined by state discount factors limited by prices of a riskless bond and the underlying asset. Usually the asset has at least two market-traded options for each maturity, further limiting the factors. Tighter bounds result from incorporating the prices of all existing options of the same maturity. The tightened bounds are particularly applicable to appraising the consistency of all options trading on a single underlying security, notably index options. Constructed examples indicate a potential improvement of eighty percent in bound width; index data reveals a lower reduction, but extensive arbitrage opportunities from violations of the tighter bounds. This revised version was published online in November 2006 with corrections to the Cover Date.     

Entry, exit and trading profits: A look at the trading strategies of a proprietary trading team

We examine the behavior of a 15 strong proprietary stock trading team and show how consistent intraday trading profits were generated. The team, who worked for a large US direct access trading firm, executed over 96 thousand trades in 3 months in 2000. Profitable intraday trading occurred in an anonymous dealer capacity, on both long and short positions, especially when volume and price volatility were higher. The traders rapidly entered long (short) positions when the number of dealers and size become greater on the bid (offer) side of the spread. Profits were taken early against the trend.     

Strategic investment analysis for migration beyond 3G wireless networks

This paper analyzes investment alternatives for cellular operators who deploy either universal mobile telecommunications systems (UMTS) with high speed data packet access (HSDPA) networks or UMTS with Wi-Fi networks, for moving beyond 3G-networks. The evaluated business scenarios focus on two different deployment alternatives: UMTS with HSDPA and UMTS integrated with Wi-Fi. HSDPA deployment targets the overlay on the existing UMTS cells, whereas Wi-Fi covers only indoor hot spot areas where data demand is high. Capital investments and operational costs as well as revenue streams have been analyzed for the two types of network architectures. Techno-economic methodologies have been applied for this study and results are derived that are presented and discussed for two types of wireless networks.     

Whole vs. shared ownership of foreign affiliates

This paper studies why multinational firms often share ownership of a foreign affiliate with a local partner even in the absence of government restrictions on ownership. We show that shared ownership may arise, if (i) the partner owns assets that are potentially important for the investment project, and (ii) the value of these assets is private information. In this context shared ownership acts as a screening device. Our model predicts that the multinational's ownership share is increasing in its productivity, with the most productive multinationals choosing not to rely on a foreign partner at all. This prediction is shown to be consistent with data on the ownership choices of Japanese multinationals.     

The choice of market entry mode: Greenfield investment,M&A and joint venture

Multinationals may enter a host market by different modes of foreign direct investment (FDI). This paper examines the choice of FDI mode, and shows that the profitability of greenfield investment influences this choice not only directly, but also indirectly since it determines the outside option of potential acquisition targets and joint venture partners. In particular, even if greenfield investment is a viable option, the multinational may prefer a joint venture to M&A, and M&A to greenfield investment, provided that M&A and joint venture both involve sufficiently low fixed costs. The reason is that the profitability of greenfield investment both reduces the acquisition price in the case of M&A, and gives local firms an incentive to agree to a joint venture.