Insider trading as a signal of private information

There is substantial evidence that insider trading is presentaround corporate announcements and that this insider tradingis motivated by private information. Using real estate investmenttrusts that choose to reappraise themselves as our sample, weestablish that the appraisals contain information, but findno market response to the public announcement of this informationin these appraisals. We consider two possible explanations forthis inconsistency: the first that the appraisal informationis not highlighted in earnings reports and hence remains unobserved;and the second that insiders trade on the appraisal informationin the time that elapses between the appraisal and its publicannouncement We find strong support for the second hypothesis,with insiders buying (selling) after they receive favorable(unfavorable) appraisal news, especially for negative appraisals.We also find that positive (negative) appraisals and net insiderbuying (selling) elicit significant positive (negative) abnormalreturns during the appraisal period     

Tribals,Forests and Resource Conflicts in Kerala,India: The Status Quo of Policy Change

One of the constraints in policy analysis of tribal issues in India has been the lack of analytical approaches that have looked at the existential problem of tribal communities in an integrated manner. While restrictive forest policies have played a major role in fomenting tribal unrest in India and other parts of the world, the part played by “poorly designed” development programmes in creating the impasse cannot be ignored. With reference to the District of Wayanad in north Kerala, India, it is argued that natural resource conflicts involving tribal communities have their roots in both restrictive forest policies and misplaced development strategies. While it is true that, in recent times, there has been a serious effort in India to open forests to tribal communities, this has not been accompanied by a change in basic development thinking. It is argued that, for a paradigm change in policy to occur, tribal communities need to be nurtured in forest settings. This is particularly relevant at this juncture, when the ideal of “biodiversity conservation” is considered to be the defining mark of sustainable development in the “natural resource-rich” countries of the South.     

FINANCING INNOVATIONS AND CAPITAL STRUCTURE CHOICES

The last two decades have seen a stream of innovation in financial markets, especially in corporate bonds. Some of these innovations—notably, hybrid debt—have provided firms with more flexibility in designing cash flows on borrowings, allowing them to match cash flows on financing more closely to cash flows on assets. In so doing, the use of such innovative securities has increased corporate debt capacity and hence firm value.
But if such changes have been mostly good news for corporate treasurers, the relentless torrent of innovation has sometimes resulted in firms issuing these new securities for the wrong reasons. Some have done so to take advantage of loopholes in the way ratings agencies and regulatory agencies define debt and equity—and others to exploit perceived pricing anomalies—without considering the effect of such securities on the firm's overall risk profile. In this context, it is worth noting that as corporate bonds have become more complex, investment bankers have made themselves indispensable to the process by providing pricing as well as selling support. This article aims to help managers distinguish when financing with complex securities serves their company's interests, and when it can end up hurting them.     

THE PROMISE OF REAL OPTIONS

In recent years, both practitioners and academics have argued that traditional discounted cash flow models do a poor job of capturing the value of the options embedded in many corporate actions. This paper shows how option pricing models used in valuing financial assets can be used to value three kinds of real options that are often built into corporate projects: the option to delay, the option to expand, and the option to abandon. As a number of examples in this paper suggest, corporate investments that would be rejected using conventional DCF analysis can sometimes be justified by the value of the strategic options they provide. As the illustrations also show, however, the pricing of real options is considerably more difficult than the pricing of financial options and adjustments must often be made to capture the complexity of real investments.