FIN750 Class Web
Page, Summer '19
Jacksonville
University
Instructor:
Maggie Foley
Weekly SCHEDULE, LINKS, FILES and Questions
Date |
Coverage, HW, Supplements -
Required |
|
Videos (optional) |
Pre-Class |
Textbook 1.
Microeconometrics
Methods and Application (FYI, required) 2.
Microeconometrics
Using Stata (FYI, required)
3.
Handbook
of corporate finance volume 1: empirical corporate finance (chapter 1 only, handout) 4.
Handbook
of corporate finance Volume 2: empirical corporate finance (chapter 13 only, handout) 5.
Handbook
of economics of corporate governance (Chapters 5, 6, 7 handout) ·
Chapter
5 The Evidence on
Mergers and Acquisitions: A Historical and Modern Report ·
Chapter 6,
Boards, and the Directors Who Sit on Them
·
chapter 7,
executive compensation 6.
Handbook
of economics of finance, volume 2A: corporate finance ·
chapters 7
– endogeneity, handout, ·
chapter 7 the video
made by the author, fyi Textbook information:
1. Microeconometrics:
Methods and Applications (required) Hardcover: 1056 pages Publisher: Cambridge University Press; unknown
edition (May 9, 2005) Language: English ISBN-10: 0521848059 ISBN-13: 978-0521848053 2. Microeconometrics
Using Stata (required) Publisher: Stata Press; 2 edition (March 9, 2010) Language: English ISBN-10: 1597180734 ISBN-13: 978-1597180733 3. Handbook of Corporate Finance, Volume 1: Empirical
Corporate Finance, 1st Edition
(optional)
Series: Handbooks in Finance (Book 1) Hardcover: 558 pages Publisher: North Holland; 1 edition (June 4, 2007) Language: English ISBN-10: 9780444508980 ISBN-13: 978-0444508980 4. Handbook of Corporate Finance, Volume 2: Empirical
Corporate Finance, 1st Edition
(optional)
Series: Handbooks in
Finance (Book 2) Hardcover: 608 pages Publisher: North Holland;
1 edition (November 7, 2008) Language: English ISBN-10: 0444530908 ISBN-13: 978-0444530905 5. The Handbook of the Economics of
Corporate Governance 1st Edition
(optional)
Series: Handbooks in
Economics (Book 1) Hardcover: 760 pages Publisher: North Holland;
1 edition (October 4, 2017) Language: English ISBN-10: 0444635300 ISBN-13: 978-0444635303 6. Handbook of the Economics of Finance:
Corporate Finance 1st Edition
(optional)
Series: Handbook of the Economics of Finance Hardcover: 858 pages Publisher: North Holland; 1 edition (January 2, 2013) Language: English ISBN-10: 0444535942 ISBN-13: 978-0444535948 |
|
|
First
Month |
|
||
First,
First
Month |
Corporate
Governance and Executive Compensation Reading list ****************
Papers, Friday afternoon ************************* For each of the following paper, please prepare
your answers to the following questions. 1.
Why is this paper important in the literature? What is its
contribution? 2.
What is the research question in this paper? 3.
What are the hypotheses that are brought up in the paper? 4.
How do the authors test the hypotheses? 5.
What are the major findings? 6.
What are the potential problems in this paper? (You might refer
to the ‘future research ideas’ in the conclusion session for ideas) 7.
If you were the researchers in this field, how can you do a
follow up study based on this paper? ·
Jensen, M., and W. Meckling,
1976, “Theory of the
firm: managerial behavior, agency costs and ownership structure,” Journal of Financial Economics 3,
305-360 (Friday afternoon) A summary FYI only --- by OLUSEUN PASEDA,
Ph.D. Candidate Another summary ppt FYI only by Peng, Lee, Tang ·
Stuart
L. Gillan, Jay C. Hartzell, and Robert Parrino, 2009, Explicit vs.
Implicit Contracts: Evidence from CEO Employment Agreements, Journal of Finance, LXIV, 4, 1629-1655. (Friday afternoon) ·
Chhaochharia,
Vidhi and Yaniv Grinstein. 2009. CEO
Compensation and Board Structure.
Journal of Finance 64(1) (February), 231-261 (Friday afternoon) ·
Guthrie, Sokolowsky, and Wan, 2012, CEO Compensation and
Board Structure Revisited, Journal
of Finance 67(3) (June), 1149-1168 ( https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1680476)
(Friday afternoon) ·
Governance
with multiple objectives: Evidence from top executive turnover in China, JCF, 2009 (This paper is also used for
replication study) (Friday afternoon) ·
Harris, M., and A. Raviv, 1988, “Corporate governance: voting
rights and majority rules,” Journal of Financial Economics 20, 203-235
(optional) ·
Adams,
Renee, and Daniel Ferreira, 2006, A
theory of friendly boards, Journal of Finance 62, 217–250 (optional) ·
Core,
John E., Robert W. Holthausen, and David F. Larcker, 1999, Corporate
governance, CEO compensation, and firm performance, Journal of Financial
Economics 51, 371–406 (optional) Questions based on the papers,
might appear in the final (Will be posted before 6/2/2019) 1.
Coming soon 2.
Coming soon 3.
Coming soon 4.
Coming soon |
|
Research
ideas based on the five articles. 5.
The
higher the fraction of outside financing from equity, the higher the agency costs
are. Is that true? Between firms with high outside financing from equity and
the peers with low rate, are there any differences in terms of the monitoring
costs and the bonding costs associated with agency costs? 1.
Is
there any association between CEO turnover in the future and CEO contract
being either implicit or explicit? 2.
Is
there any association between CEO turnover in the future and the contents in
the contract? Which component in the contract is the key determinants to the
potential CEO turnover? Salary, incentives? 3.
Did
the potential CEO have any bargaining power when the contract is in the
negotiation stage? 4.
With
an implicit contract, the CEO tends to be more risk averse or more risk
lover? What about with explicit contract? (Can use the model in JM 1976 to
identify the hypothesis) 5.
CEO
compensation and board structure could be revisited for those with an
implicit contract and those with an explicit contract? 6.
Are
CEO compensation’s equity components defined implicitly or explicitly in the
CEO contract? Also, we can check in more detail regarding the components in the CEO
compensation and how it is explained in the CEO contract. This is important,
because once it is stated in the contract, board has no rights to change this
part. Then this paper’s rational is questionable. 7.
Is
board supervision on CEO compensation an optimal solution to increase
shareholder values? 8.
First,
it would be interesting to explore whether changes in board structure
affected other board policies, such as CEO replacement policies or nomination
policies of new directors (From Chhaochharia and Crinstein, 2009) 9.
Second,
it would be important to explore whether these changes in boards had an
actual impact on corporate performance in the long run (From Chhaochharia and
Crinstein, 2009) 10.
There are other factors, such as market
conditions, firms’ vision and strategies, composition of different
stakeholders and their relative influences etc., could also affect the relative
importance of firm performance in shareholders’ objective function and
therefore their incentive to discipline managers on the basis of firm
performance. Analyzing how these factors affect turnover-performance links is
a fruitful direction for future research (JCF, Chang, Wong, 2009) |
Second,
First Month |
********Replication
using Stata, Saturday Morning******** 1. Microeconometrics
Methods and Application (FYI, required) 2. Microeconometrics
Using Stata (FYI, required) Saturday
morning) (pages 445-464, 1-14)
My study using
the above books as guideline for code and econometric model (FYI) Option
1 Paper: Governance
with multiple objectives: Evidence from top executive turnover in China, JCF, 2009 **** Part I: the CEO turnover dataset** (new, or
update, same as in class exercise) Raw Data:(TurnOver_orig.dta, same as in class exercise,
to get table 1, need GTA2008.dta, see below) Code in stata (this version
works. Bugs were fixed) – same as did in class Results: Final
dataset, ready for merging with finance dataset Table 1 Table 2
left Table 2 right (To get Table 1 and Table2, run the following
code, with both data – TurnOver_orig.dta and GTA2008.dta) Code here ** Part II and III Merging with finance data and logit
regression ** Raw data
(GTA2008.dta, Finance data here ) Code in stata
(updated, final version) (Part II and part III both working, final version, however, to
run the code, pleases download the ado zip file, unzip it, and then add all
files to stata15/ado/base folder. Those files are the commands that stata15 typically
does not recognize. Here is this zip file) Videos
Part II (merged data) (new) Videos
part III (logit model) (new) Results Table 6 table 7 Table 8 (new) Sample replication study FYI (on
blackboard) Replication Structure Word File FYI (will be updated
soon) Replication
variable definition
|
|
|
********** Book Chapters, Saturday
afternoon ************************* ****** book chapters ***** ·
Board,
chapter 6, handbook of the
economics of corporate governance (Saturday afternoon) Questions based on the papers,
might appear in the final (Will be posted before 6/2/2019) 1.
Coming soon ·
Executive
compensation, chapter 7 (optional), handbook of the economics of corporate
governance |
|
|
|
Third,
First Month |
Assignments - 1st week (Due when next class starts in June) 1.
Pick
one article assigned for reading and write a critique (3-5 pages long) (fyi:
how to critique a journal article) 2.
Replicate one of the above two
studies using Stata (due by the end of the semester) *** updated 3.
Pick
one article assigned for reading and write a summary (5-10 pages long) |
|
|
|
|||
Second
Month |
|
||
First,
Second Month |
Corporate Finance: Capital Structure and Merger and
Acquisition Reading list ****** papers****** ·
*Modigliani,
F., and M. Miller*, 1958, “The
cost of capital, corporation finance, and the theory of investment,” American Economic Review 48, 261-297 PPT summary of MM 1958 (new) A Summary by Dr. Cooney
(FYI) ·
*John
R. Graham1,2 and Mark T. Leary*, “A Review
of Empirical Capital Structure Research and Directions for the Future”
Annual Review of Financial Economics, Vol. 3:309-345 (Volume publication date
December 2011) ·
*Thomas
J. Chemmanuran, Yingmei Chengb, Tianming Zhang*, “Human
capital, capital structure, and employee pay: An empirical analysis”, ·
Corporate Financial Policy and the Value of Cash by FAULKENDER and WANG, JF2006 (This paper is also used for
replication study) PPT
(new) ·
JOHN R. GRAHAM*, 2000, “How Big Are
the Tax Benefits of Debt?”, THE JOURNAL OF FINANCE • VOL. LV, NO. 5 •
OCT. 2000 (optional,
updated) ·
Miller, M., 1977, “Debt
and taxes,” Journal of Finance 32, 261-275 (optional) ·
Jensen M., 1986, “Agency
costs of free cash flow, corporate finance and takeovers,”
American Economic Review 76, 323-329.
(optional) ·
DeAngelo, H. and Roll, R. (2015), How
Stable Are Corporate Capital Structures? (word file here)
Journal of Finance, 70, 373–418 .(optional) ·
*Myers,
S., and N. Majluf, 1984, “Corporate
financing and investment decisions when firms have information that investors
do not have,” Journal of Financial Economics 13, 187-221
(optional) ·
Ross, S., 1977, “The
determination of financial structure,” Bell Journal of Economics 8, 23-40 (optional) ·
Harris, M., and A. Raviv, 1991, “The
theory of capital structure,” Journal of Finance 46, 297-355
(optional) ·
DeAngelo,
Harry and Ron Masulis, 1980, “Optimal
capital structure under corporate taxes” , Journal of financial
economics, Vol. 8, No. 1, pp. 3-27 (optional)
Questions based on the papers,
might appear in the final (Will be posted before 6/2/2019) 1.
Coming soon 2.
Coming soon ****** book chapters ***** ·
Executive
compensation, chapter 7 handbook of the economics of corporate
governance (optional) ·
Merger and
Acquisition, chapter 5, (optional) handbook of the economics of corporate
governance ·
Capital structure, chapter
13, Christopher
Parsons1 and Sheridan Titman, handbook of empirical corporate finance volume 2 (optional, updated, since we will
read another literature review article related to this topic) Questions based on the papers,
might appear in the final (Will be posted before 5/30/2019) 1.
Coming soon 2.
Coming soon |
|
Potential research
questions 1.
CEO pay and leverage is found to be positively
correlation, but to what extent? § In
other words, the positive association between CEO pay and leverage is found
to be statically significant. Is it economically significant as well? Is a 1%
increase in leverage associated with a significant increase in CEO
compensation? 2.
CFO is the one that made the leverage
decision, not CEO. Why not study CFO compensation and leverage? 3.
CEO compensation includes salary, stock
options, bonus, and other implicit components, such as inside debt (pension
and deferred compensation), and perks. So it is better to focus on CEO’s
total compensation. 4.
High leverage, so high bankruptcy potential
and therefore higher CEO pay. Why not just the other way around? CEO pay is
high, so he is more anxious to make higher profits so that he can keep his
job. Therefore, he issued lots of debt for risky investments. High CEO pay è
high leverage. This paper found high leverage è
high CEO pay. It is an endogeneity problem (X and Y could happen simultaneously). 5.
Marginal cash value could be variant cross
industries. The paper does not control for industry. 6.
Marginal cash value could be more valuable
during financial crisis. Is that true? 7.
The future research directions mentioned in
Graham and Leary. Nobel Prize Lecture Series (FYI) Advanced Video: Robert Shiller Nobel Prize
Lecture on Stock Valuation Advanced Video: Eugene Fama Nobel Prize
Lecture on Market Efficiency |
Second, Second
Month |
Research
Methodology: Event Study and Endogneity Reading list ****** papers****** ·
Corporate
Financial Policy and the Value of Cash by FAULKENDER and WANG, JF2006 (This paper is also used for
replication study) ****** book chapters ***** ·
Event study, Chapter 1 handbook of Corporate
Finance, Volume 1: Empirical Corporate Finance Another paper about
Event study (FYI, hard to follow, new) and its Ppt is easy to follow (new) ·
Endogeneity,
chapters 7 (skip
sections 4, 5, 6, and 8, pages 520-557 & 560-566, new) handbook of economics of finance: corporate finance ·
chapter 7 the video made
by the author (new, fyi) ·
Endogeneity:
An inconvenient truth (full version), by John Antonakis (video, FYI, new)
Event Study Stata Code (new) Data (new) Videos Part
I Part
II (both new) For the above study, please
refer to the following to merge the original datasets available at
http://dss.princeton.edu (new) *
http://dss.princeton.edu/usingdata/stata/analysis/eventstudy.html *
http://dss.princeton.edu/usingdata/stata/analysis/eventstudydataprep.html *use
http://dss.princeton.edu/sampleData/eventdates.dta /* about 11k */ *save
C:\stata15mp\eventdates.dta *use
http://dss.princeton.edu/sampleData/stockdata.dta, clear /* about 90m */ *save
C:\stata15mp\stockdata.dta /* * merge two datasets use
C:\stata15mp\eventdates.dta, clear drop targetname *file size will be a lot smaller
after deleting this variable* sort company_id *sort so that can merger later* save eventdate_1, replace use C:\stata15mp\stockdata,
clear sort company_id *for merging* merge company_id using
eventdate_1 drop if _merge != 3 *only keep observations with the
complete event* save eventda, replace Questions based on event study
and endogneity, might appear in the final (Will be posted before 6/2/2019) a.
Coming soon b.
Coming soon |
|
********Useful information from Princeton’s website
FYI******* Event
Studies with Stata (FYI)
An event study is used to examine reactions of the market
to events of interest. A simple event study involves the following steps: ·
Cleaning the Data and Calculating the Event Window ·
Estimating Normal Performance ·
Calculating Abnormal and Cumulative Abnormal Returns ·
Other
Websites for event study FYI https://eventstudymetrics.com/
(event study metrics software and data, will be open source software, and
free soon) https://sourceforge.net/p/eventstudy/code/ci/master/tree/
(stata, have code ado file) https://eventstudytools.com/data-sources
(have data, source, explanation) http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datacurrent.html
(misc data and many more) Event
Replication TTU Finance PhD seminar
2009(all new, FYI) |
Third, Second
Month |
Replication
using Stata Revisit the paper of last class Paper: Governance
with multiple objectives: Evidence from top executive turnover in China, JCF, 2009 Discuss
on Methodology, Code, Results, Econometrics models. Option
1 (required, updated) Paper: Corporate
Financial Policy and the Value of Cash by FAULKENDER and WANG, JF2006 (using long term event study
methodology) PPT (new) Data - use GTA2008.dta Code
– here it is 5_24_2019
version (updated) Videos
Part I Part II Part III Part IV Part V (all new) (Table-1) (Table-1) (Table-2) (Tables-3,4) (Table-5) |
|
|
Fourth,
Second Month |
Assignments of the second
week (Due by 6/17)
4.
Pick
an article assigned for reading and write a critique (fyi:
how to critique a journal article) 5.
Pick
an article assigned for reading and write a summary 6.
Replication
of the paper by Faulkender and Wang, 2006 (group project, report tables 1-5, new) 7.
Replication
of the paper by Chang and Wong, 2009 (from the previous class, report the
results, except table 3, new) 8.
Based
on the event study code as given, change the event window to [-3,+3] and the
estimation window to [-90, -30].
Report the t value and p value for the significant test of the daily abnormal
return , between [-3,3] and the t test result for the hypothesis of CAR=0
(group project, new) |
|
|
Final Exam (posted on blackboard under course
introduction due by 6/9 11:59pm) |
|
||
|
|||
|
|||
|