Kathleen A. Farrell, Gordon V. Karels, Kenneth W. Montfort and Christine A. McClatchey
Existing and potential investors are vitally interested in the improvement of their wealth prospects. Receipt of cash, whether in the form of cash dividends or capital gains…
Abstract
Existing and potential investors are vitally interested in the improvement of their wealth prospects. Receipt of cash, whether in the form of cash dividends or capital gains, represents fulfilment of this expectation. Such fulfilment is only possible when an enterprise registers growth in its resource base. Reported income is considered a good indicator of success achieved by an enterprise because it represents increase in available resources. An important link between reported income and stock prices is the link between future earnings and current earnings. This study utilizes data from FAS No. 33 to develop real ploughback measure indicating a firms ability to continue its operations successfully and to enhance its future earnings potential. The results of the study show that the market uses sophisticated models in evaluating the signal contained in ploughback earnings.
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John M. Geppert, Stoyu I. Ivanov and Gordon V. Karels
The purpose of this paper is to examine the shocks to firm's beta around the event of addition or deletion from the S&P 500 index.
Abstract
Purpose
The purpose of this paper is to examine the shocks to firm's beta around the event of addition or deletion from the S&P 500 index.
Design/methodology/approach
The total derivative of beta and Campbell and Vuolteenaho decomposition of beta methodologies are used, on monthly and daily basis, to examine the behavior of beta around the event.
Findings
Results show a significant increase in correlations of the event firms' returns and the market proxy returns and cash‐flow betas, and decrease in discount‐rate betas for added firms and the opposite effects for deleted firms. Robustness tests indicate that the total derivative changes effects are typical for the event firms industry but that the cash‐flow correlation changes are specific to the firm. These findings suggest that addition or deletion from the S&P 500 index is not an information free event.
Research limitations/implications
The Campbell and Vuolteenaho methodology has limitations – it is conditional on the selection of state variables. In future research it would be beneficial to use different state variables in the beta decomposition framework. Another relevant question for a future research is: what are the effects of the event on the Fama‐French factor model loadings?
Originality/value
The paper's findings contribute to the ongoing debate in the literature of the information hypothesis for addition or deletion from the S&P 500 index.
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Kathleen A. Farrell, Gordon V. Karels, Kenneth W. Montfort and Christine A. McClatchey
An interesting issue little explored in the celebrity endorsement literature is whether or not the activities of a celebrity endorser affect company performance. We examine the…
Abstract
An interesting issue little explored in the celebrity endorsement literature is whether or not the activities of a celebrity endorser affect company performance. We examine the impact of Tiger Woods’s tournament performance on the endorsing firm’s value subsequent to the contract signing. We do not find a relationship between Tiger’ss tournament placement and the excess returns of Fortune Brands (parent of Titleist). This is likely due to Titleist being a very small contributor to the total market value of Fortune Brands. We also fail to find a significant relationship for American Express suggesting the market does not view a golfer endorsing financial services as credible. We do, however, find a positive and significant impact of Tiger’s performance on Nike’s excess returns suggesting that the market values the additional publicity that Nike receives when Tiger is in contention to win.
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Krishnan Dandapani, Gordon V. Karels and Edward R. Lawrence
Existing empirical evidence indicates internet banks worldwide have underperformed newly chartered traditional banks mainly because of their higher overhead costs. The purpose of…
Abstract
Purpose
Existing empirical evidence indicates internet banks worldwide have underperformed newly chartered traditional banks mainly because of their higher overhead costs. The purpose of this paper is to examine the impact of internet banking services on credit union activity.
Design/methodology/approach
The impact of internet banking services on credit union over the period 1999‐2006 was studied and regression equations were estimated for the growth in assets, operating expenses and return on assets as functions of portfolio characteristics, economic conditions and a dummy variable indicating if the credit union has adopted internet banking services.
Findings
The operating costs of credit unions providing web access were found to be significantly higher than those credit unions which do not have any web account offerings. There is increased growth in assets for the credit unions which have worldwide web accounts although this relationship is statistically significant in only three of the eight years studied. The return on assets show that the credit unions with web accounts have similar average profitability to those credit unions that do not provide the facility of internet access to their customers.
Research limitations/implications
Consideration could be given to running the regressions with the number of years the web site has been in place instead of just a dummy variable and putting in common bond dummy variables. Some common bonds are so narrow it may not pay to have internet services.
Practical implications
Even though there are costs associated with providing internet services, the retention of profitability and the evidence of potentially higher asset growth rates suggest the importance of internet banking and the trend of internet banking adoption is expected to continue in the near future in the credit union industry.
Originality/value
This is a pioneering study on the effect of internet banking services on the costs, growth and profitability of Credit Unions in the USA.
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Jeffery Scott Bredthauer, Brian C. Payne, Jiri Tresl and Gordon V. Karels
The purpose of this paper is to investigate the absolute and risk-adjusted stock return performance of the US health care industry conditional upon the presidential…
Abstract
Purpose
The purpose of this paper is to investigate the absolute and risk-adjusted stock return performance of the US health care industry conditional upon the presidential administration’s political party and the Federal Reserve’s monetary policy stance. It evaluates this return behavior across the 60-year time period from 1954 to 2013, and sub-divides this entire period into the pre-Medicare period (1954-1964), Medicare period (1965-1984), and Medicare-plus-high-health-care-inflation period (1985-2013).
Design/methodology/approach
The study uses monthly returns to the health care industry and overall market, characterizing each sample month as either having a Republican or Democratic president and either a contractionary or expansionary monetary policy regime determined by whether the Federal Reserve is increasing or decreasing interest rates, respectively. It incorporates univariate and multivariate analysis to quantify the return behavior of both the health care industry and the overall market during the entire period and all three sub-periods. Additionally, it utilizes a common four-factor multivariate regression model and associated hypothesis testing to characterize risk-adjusted excess returns (i.e. α) to the health care industry during the entire period and all three sub-periods.
Findings
The health care industry has earned robust, positive risk-adjusted returns with the magnitude of the returns sensitive to the political party of the administration and the monetary policy regime. The authors find that prior to 1965 (1954-1964), when the president was a Republican, during times of monetary contraction, health care earned an excess risk-adjusted return. There was no association between Democratic administrations and excess health care returns prior to 1965. In contrast, the authors find that after 1965 this relationship changes. The authors find that returns to health care were positive for Republicans during times of monetary expansion and positive for Democrats during monetary contraction. The authors also find this relationship has become more pronounced after 1984.
Originality/value
The study extends prior literature, which has shown that the health care industry is a priced factor in the US stock market and that it provides significant risk-adjusted returns in the recent past. Uniquely, this study shows that the excess returns to health care vary considerably over the past 60 years, and that these excess returns are quite sensitive to political policy, proxied by the presidential administration party, and monetary policy, as measured using Fed discount rate changes. These findings have implications for management and shareholders of highly regulated and subsidized industries and firms.
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Otis W. Gilley and Marc C. Chopin
Although most labor and microeconomic textbooks contain a theoretical discussion of the backward‐bending labor supply curve, scant empirical evidence of this phenomenon exists. In…
Abstract
Although most labor and microeconomic textbooks contain a theoretical discussion of the backward‐bending labor supply curve, scant empirical evidence of this phenomenon exists. In this paper we investigate the behavior of PGA golf professionals as they make labor‐leisure choices for performing on the PGA Tour. Using tournament theory to model this labor market and data from tournament performances over three seperate years, we find significant evidence that higher paid PGA Tour players do indeed operate in the backward‐bending region of their labor supply curves.
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Tom Schultheiss and Linda Mark
The following classified, annotated list of titles is intended to provide reference librarians with a current checklist of new reference books, and is designed to supplement the…
Abstract
The following classified, annotated list of titles is intended to provide reference librarians with a current checklist of new reference books, and is designed to supplement the RSR review column, “Recent Reference Books,” by Frances Neel Cheney. “Reference Books in Print” includes all additional books received prior to the inclusion deadline established for this issue. Appearance in this column does not preclude a later review in RSR. Publishers are urged to send a copy of all new reference books directly to RSR as soon as published, for immediate listing in “Reference Books in Print.” Reference books with imprints older than two years will not be included (with the exception of current reprints or older books newly acquired for distribution by another publisher). The column shall also occasionally include library science or other library related publications of other than a reference character.
LIBRARIES are not a first priority in the building programme of the nation. It would be difficult to make them so. The Library Association Council, we are assured, have this…
Abstract
LIBRARIES are not a first priority in the building programme of the nation. It would be difficult to make them so. The Library Association Council, we are assured, have this matter under consideration continually and will lose no opportunity to urge the need for extensions of old buildings and for new ones. The demand for libraries grows, in the face of other needs, at a pace which is both a pleasure and an embarassment to librarians. Some authorities have made provision for new libraries this year in budgets which come under consideration this month, and we hope the Ministry concerned will allow some of these projects to be realized.
All items listed may be borrowed from the Aslib Library, except those marked, which may be consulted in the Library.