Corporate debt sales have been regarded as “no news” events because there is no significant price reaction on average to their announcement. We explore the hypothesis that this lack of average price reaction to debt sale announcements is explained by the partial anticipation of debt offers. Theory suggests that the demand for debt capital is fundamentally related to changes in the sources and uses of funds, and we find evidence that earnings are significantly lower, investment growth is significantly higher, and, for some issuers, debt refunding requirements are significantly greater in the period immediately prior to issue than in periods well before and after the issue. We find that this preissue information conditions investors’ expectations of issue, thereby affecting the cross-sectional announcement date price reaction to debt sales in two ways. First, announcement date price reactions are negative, on average, for unanticipated offers or for those offers where prior information suggests that an issue is unlikely. Second, holding the probability of issue constant, announcement date price reactions are significantly more negative for offers that raise more capital than investors expected. These results are consistent with cash flow signaling and asymmetric information models of corporate financings.

Firms with low Tobin's Q and high cash flow have significantly more positive dividend initiation announcement returns than do other firms. I interpret this result as consistent with the hypothesis that reductions in the agency costs of overinvestment at firms with poor investment opportunities and ample cash flow are reflected in higher dividend initiation announcement returns. Further tests, such as examining the impact of governance metrics on initiation announcement returns following the dividend tax cut of 2003 and examining the long-run cash-retention policies of dividend-initiating firms, are consistent with this interpretation. There is also some evidence that is consistent with the cash flow signaling hypothesis, as dividend-initiating firms with low Tobin's Q and low pre-initiation cash flow experience substantial revisions in analysts' earnings forecasts and significantly positive initiation announcement returns.

This paper examines the predictions of the performance based arbitrage hypothesis for the merger arbitrage market. Performance based arbitrage [Shleifer, A., Vishny, R.W., 1997. The limits of arbitrage. Journal of Finance, 52 (1), 35–55] is the notion that funds under management are withdrawn from arbitrageurs following trading losses, resulting in inefficient prices for securities subject to arbitrage trades. I examine general comovement in merger arbitrage spreads and the response of spreads to large arbitrage losses and substantial changes in deal flow. I find little evidence that merger arbitrage spreads exhibit systematic comovement or are substantially affected by important liquidity events in this market.

Previous work by Aggarwal and Samwick [Aggarwal, R., Samwick, A., 1999. The other side of the tradeoff: the impact of risk on executive compensation. Journal of Political Economy 107 pp. 65–105] has documented the importance of controlling for the variance of firm stock returns when estimating pay–performance sensitivities. They find that pay–performance sensitivities are an order of magnitude greater for small vs. large variance firms. Using a comparable sample of CEOs, I provide evidence that when properly controlling for firm size, the negative effect of variance in stock returns on estimated pay–performance sensitivities is greatly diminished. In particular, when using dollar returns as the measure of firm performance, it is imperative to properly control for firm size.

This paper examines the relationship between the likelihood a firm is acquired and the governance and financial characteristics of the firm. Given many of the developments in the corporate control market in the late 1980s, I suspect that the process governing takeover likelihood may have changed in the 1990s. I examine a sample of 342 NYSE/AMEX firms that were acquired during the 1990–1997 period and compare them to a matched sample of nonacquired firms. I find that firms that were acquired over this period can be characterized as having lower managerial ownership and higher ownership by outsiders, particularly higher ownership by nonmanagement blockholders with board representation. The fact that managerial ownership is negatively related to takeover likelihood is consistent with studies using data from 1970s and 1980s. This suggests that managerial ownership helps managers maintain control, or alternatively that ownership proxies for how much managers care about control.

IN SUCH fields of investigation as economics, psychology, and anthropology, where observations on several variables are taken into account simultaneously, it is at least as important to study relationships among the variables as to consider the variables separately. In fact, if there are significant relationships within a system of variables, a considerable part of the information furnished by the observations will be lost unless the relationships are taken into account. In general, very little is known a priori about such a set of variables, and hence our knowledge of them and their various interrelations must be inferred from observations. Questions relating to the problem of making inferences from observations resolve themselves into those of, (1) devising suitable functions of the observations for estimating parameters which characterize the hypothetical population of the variables and (2) determining frequency laws from which the degree of credibility to be placed in the departure of these functions from expectation can be evaluated. The more complicated the hypothesis concerning the interrelations of the variables, the more complex, of course, will be the functions of observations for measuring the relationships and testing the hypothesis. It frequently happens in multivariate analysis that a number of variables can be rationally classed into several mutually exclusive categories. For example, certain measurable traits of individuals may be classed as physical or mental. In the study of wholesale prices of farm products in a certain region over a certain period of time, the products may be classed as (1) fruits, (2) vegetables, or (3) dairy products, and the deviations of the prices of products within each group from seasonal and secular trends may be taken as the variables. When variables can be grouped in such a manner the question naturally arises as to whether or not there is any significant relationship between the groups of variables. That is, on the basis of the available observations, with what degree of credibility can we assert that the groups are mutually independent, so that knowledge relative to one of the groups gives us no significant information about the others? If they are significantly non-independent how can we measure the amount of dependence? It will become apparent as we proceed that statistical functions' and significance tests more general and comprehensive than I See R. Frisch, Correlation and Scatter in Statistical Variables, Nordielk

S. D. Deshmukh, S. D. Chikte; Dynamic Pricing with Stochastic Entry, The Review of Economic Studies, Volume 43, Issue 1, 1 February 1976, Pages 91–97, https://d

Journal Article Tax Policy, Corporate Saving and Investment Behaviour in Britain Get access M. S. Feldstein, M. S. Feldstein Harvard University Search for other works by this author on: Oxford Academic Google Scholar J. S. Flemming J. S. Flemming Nuffield College, Oxford Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 38, Issue 4, October 1971, Pages 415–434, https://doi.org/10.2307/2296687 Published: 01 October 1971

Auditing, Audit quality, Audit performance, Time pressure