Template-Type: ReDIF-Article 1.0 Author-Name: Yufen Fu Author-Name: George W. Blazenko Title: Returns for Dividend-Paying and Non Dividend Paying Firms Abstract: In this paper, we compare the equity returns of dividend-paying and non-dividend paying firms. We find no unconditional return difference even though non-dividend paying firms have many characteristics that suggest high risk. Equivalently, because non-dividend paying firms have high risk-metrics, their returns are abnormally low compared with dividend-paying firms. The reason for these anomalies is that a larger fraction of non-dividend paying firms are in financial distress and, despite high distress-risk and high growth-leverage, firms in financial distress have low returns from high volatility that decreases the optionsleverage of equity. Removing firms in financial distress, returns for non-dividend paying firms increase relative to dividend-paying firms and abnormal returns disappear. We argue that part of the reason that firms in financial-distress have high volatility that leads to low returns is managerial risk-shifting that takes form as unexpectedly high capital expenditure rates. Classification-JEL: G12, G32, G33, G35 Keywords: Equity Returns, Dividends, Financial Distress, Volatility, Growth Journal: The International Journal of Business and Finance Research Pages: 1-20 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:1-20 Template-Type: ReDIF-Article 1.0 Author-Name: Wenjing Ouyang Author-Name: Menghistu Sallehu Title: How do Broad-Based Stock Option Grants Affect Firms' Overall Future Productivity Abstract: We investigate the impact of broad-based stock option grants on future firm productivity using a sample of U.S. firms from 1990-2006. We focus on stock option grants predominantly to rank-and-file employees (broad-based stock options) because significant amount of stock options are granted to rank-and-file employees other than the top five named executives. This study documents that the extent of broad-based stock option grants are negatively associated with future firm productivity. Further tests show this negative relation is attenuated by a firm’s financial constraints and stock price informativeness but is exacerbated in new economy industry firms. We interpret these results as evidence that the expected incentive effect of broad-based stock options fails to compensate for the additional direct and indirect costs associated with such compensation programs. In cases when it is necessitated by a firm’s financial condition or when stock price informativeness closely link its value with firm performance, the broad-based stock option less likely leads to diminished productivity. However, it more likely does so in firms where resources for R&D and capital investment are crucial for growth. Robustness tests show endogeneity issues do not drive our results. Other than making significant contribution to the academic literature, this study also has important practical implications in designing efficient compensation packages. Classification-JEL: G30, J33 Keywords: Broad-Based Stock Options, Productivity, Financial Constraints, New Economy Industry, Stock Price Informativeness Journal: The International Journal of Business and Finance Research Pages: 21-38 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:21-38 Template-Type: ReDIF-Article 1.0 Author-Name: Hani El-Chaarani Title: The Impact of Financial and Legal Structures on the Performance of European Listed Firms Abstract: This study examines the impact of capital structure on the performance of listed firms in the European region by considering different systems of legal protection. Based on 5,050 listed firms in eight European countries, the results of the study reveal that owners in low level of legal investor protection countries are more likely to use the firm’s capital structure to serve their own interests. In the case of high level of legal protection the results indicate that debt is used as a disciplinary tool to constrain the expropriation of private benefits. Classification-JEL: K4, F23 Keywords: Capital Structure, Financial Performance, Legal Protection, Financial Behavior, Leverage Journal: The International Journal of Business and Finance Research Pages: 39-52 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:39-52 Template-Type: ReDIF-Article 1.0 Author-Name: Glen Hansen Title: Predicting Loan Loss Provisions by Including Loan Type Characteristics Abstract: Researchers examining managerial behavior in the banking industry rely almost entirely on the validity of discretionary loan loss provision models in reaching their conclusions. Very little research analyzes the usefulness and effectiveness of discretionary loan loss provision models. This places our knowledge about managerial discretion in the banking industry on a precarious foundation. This paper evaluates the effectiveness of extant discretionary loan loss provision models and a newly developed model. The new model incorporates loan type variables such as real estate, credit card, commercial, and individual loans. The paper analyzes the models with respect to their explanatory power and the persistence of their discretionary and nondiscretionary components. The new model performs the best in explaining loan loss provisions. All of the variables introduced in the new model are highly significant and the nonperforming credit card loan variable is particularly important, as its coefficient is an order of magnitude larger than other nonperforming loan variables. The new model also produces a discretionary component that has persistence characteristics that are most consistent with managerial discretion. The analysis produces a highly effective new model and provides important evidence on extant loan loss provision models. Classification-JEL: G21, M41 Keywords: Loan Loss Reserves, Loan Loss Provisions, Earnings Manipulation Journal: The International Journal of Business and Finance Research Pages: 53-67 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:53-67 Template-Type: ReDIF-Article 1.0 Author-Name: Olayinka Olufisayo Akinlo Title: Impact of Foreign Exchange Reserves on Nigerian Stock Market Abstract: This paper investigates the relationship between foreign exchange reserves and stock market development in Nigeria over the period 1981-2011. We use a multivariate framework incorporating an interest rate variable. The results show that a long run relationship exists among exchange rate reserves, interest rates and stock market development. Foreign reserves have a positive effect on stock market growth. Bidirectional causality exists between interest rates and stock market growth. Finally, a bidirectional relationship exists between interest rates and foreign reserves. Classification-JEL: E62 Keywords: Foreign Exchange Reserves, Stock Market Journal: The International Journal of Business and Finance Research Pages: 69-76 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:69-76 Template-Type: ReDIF-Article 1.0 Author-Name: Jack J.W. Yang Author-Name: Tsung-Hsin Wu Title: Announcement Effect of Cash Dividend Changes around Ex-Dividend Days: Evidence from Taiwan Abstract: Dividend policy has been a puzzle in corporate finance for many decades. So far, the dividend policy continues to be a puzzle in the strategic firm development process. This paper studied the effect of exdividend date for cash-dividend policy in the Taiwan Stock Exchange (TWSE) from 2001 to 2012. We try to demonstrate the existence of abnormal returns by examining stock trading situations before and after the ex-dividend date. We discovered the cumulative abnormal returns ratio reached 2.07% during the 10 days before and after the ex-dividend date. This paper further analyzes whether firms adopting cash-dividend changes have different abnormal returns on stock price performance depending on different variables. We discovered the average abnormal return ratio of the group with a cash dividend increase was 1.96%. The average abnormal return ratio of the group with a cash dividend decrease was 0.48%. Moreover, we analyze whether different industries impact cumulative abnormal return ratios. Finally, we discuss whether the cumulative abnormal return ratios were different before and after financial crisis. Classification-JEL: G12, G14 Keywords: Cash Dividend, Abnormal Returns, Event Study Journal: The International Journal of Business and Finance Research Pages: 77-91 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:77-91 Template-Type: ReDIF-Article 1.0 Author-Name: Rahul Ravi Title: Is there Asymmetric Information About Systematic Factors? Evidence from Commonality in Liquidity Abstract: This paper provides an empirical investigation of the hypothesis that there exists information asymmetry about systematic factors. Using a sample of 112 exchange traded funds (ETF) we provide evidence in support of this hypothesis. Furthermore, through the analysis of the the adverse selection component of the bid-ask spreads (lambdas) of these ETFs and all common stocks trading on the NYSE and the NASDAQ from January 1999 to December 2003, we provide strong evidence of commonality in the adverse selection component of liquidity. We use the estimated lambda of Standard and Poor’s Depository Receipts (SPDRs) as a measure of information asymmetry about the U.S. equity market and find that these are (i) positively correlated with the lambdas of other exchange traded funds (ii) related to the lambdas on individual equity securities and (iii) they can be explained by measures of uncertainty about the aggregate market. Classification-JEL: D82, G19 Keywords: Liquidity, Information Asymmetry, Commonality Journal: The International Journal of Business and Finance Research Pages: 93-104 Volume: 9 Issue: 2 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n2-2015/IJBFR-V9N2-2015-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:93-104