In this paper I assess the degree of similarity in the cross-sectional pricing of Internet and non-Internet stocks during the tumultuous year of 2000. Despite large differences in their economic fundamentals, I find that the equity market values of Internet firms with immaterial web traffic, firms that are randomly selected, and firms that went public at the same time as Internet firms are similarly related to analysts' forecasts of earnings in 2001 and the long-term rate of growth in earnings. This is not the case for firms with intensive web traffic. I also find that at the peak of Internet prices in March 2000 the market rewarded losses of web-traffic-intensive firms but did not reward profits, while after the peak the market reversed its view, rewarding profits but not losses. Beyond earnings, web traffic is significantly positively priced both at and after the Internet peak. However, I find no evidence that two proxies for supply and demand forces – the degree of public float and short interest – are value-relevant for Internet firms. Overall, I argue that there are enough similarities in the cross-sectional pricing of Internet and non-Internet firms to make it unlikely that the pricing of Internet stocks during 2000 was entirely irrational. Moreover, any irrationality in the prices of Internet stocks cannot be linked to public float and short interest.

In this study I empirically examine U.S. publicly traded firms to determine the impact of banking relationships on the future of financially distressed firms. Results demonstrate that obtaining a relationship-backed loan in the six months prior to distress identification significantly increases the probability of future firm emergence from distress. However, this effect decreases as the severity of firm distress increases. These results are robust to variations in banking relationship measures and to addressing endogeneity. This study provides evidence consistent with the value of lending relationships stemming from the ease of transmission of “soft” information within the lender's organization.

Many of the events that trigger clawback provisions are associated with risky corporate policies and variable performance outcomes. We propose and test the hypothesis that clawback provisions motivate managers to reduce firm risk. Panel ordinary least squares, general method of moments with instrumental variables, and propensity square matching models all indicate that clawback provisions decrease the volatility of stock returns. The channels that connect clawback presence to firm risk include more conservative investment and financial policies. The clawback-induced reduction in risk-taking appears to benefit shareholders on average. The gains from reduced risk-taking are larger for firms with fewer growth options, lower R&D, and prior wrongdoing.

We demonstrate the value-relevance of foreign earnings for US multinational firms by examining the associations between annual abnormal stock performance and changes in firms′ domestic and foreign incomes. For 2570 tirm-year observations between 1985 and 1993, both foreign and domestic earnings changes have significant positive associations with annual excess return measures: however, the association coefficient on foreign income is significantly larger than the association coefficient on domestic income. We demonstrate this larger association coefficient for foreign income is consistent with differences in growth opportunities between domestic and foreign operations.

Numerous studies in recent years have emphasized the importance of accounting properly for abandoment value in capital budgeting (see [1], [4], [7], [10], and [11]). For a variety of reasons, a project need be neither physically exhausted nor have negative cash flows to be abandoned. Robichek and Van Home [10] suggested that a project should be abandoned in any period in which the present value of future cash flows does not exceed its abandonment value. In a modification of this rule, Dyl and Long [4] proposed that the firm give consideration to all possible future abandonment opportunities. They argued that abandonment need not occur at the earliest possible date that the abandonment condition is satisfied, but rather at the date that yields the highest NPV over all future abandonment possibilities. A generalization of these models was offered by Bonini [1], who developed a dynamic programming model to analyze investment projects with abandonment possibilities and uncertain cash flows. More recently, Gaumnitz and Emery [7] compared the abandonment decision to the like-for-like replacement decision and noted that the correct model for a particular case depends on the suitability of the assumptions.

George M. Frankfurter, Joanne M. Hill, A Normative Approach to Pension Fund Management, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 4, Proceedings of 16th Annual Conference of the Western Finance Association, June 18-20, 1981, Jackson Hole, Wyoming (Nov., 1981), pp. 533-555

Leases, Operating lease accounting, Equity risk, Property rights

Executive compensation, Firm performance, Interindustry differences, Stewardship objective