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This paper studies the exchange rate exposure of investments by the United States, Japan and Germany in the London International Stock Exchange (LSE) from 1982 to 1991. Japanese and German investments are fully exposed to their own exchange rates, and the US is “supernominally” exposed to its own exchange rate. No significant changes in exposure are associated with the Plaza and Louvre Accords. The 1987 worldwide stock market crash exhibits a significant decrease in US exposure, and increase in German exposure. US, Japanese and German investments are also fully exposed to their own exchange rates for the periods before and after the 1986 “Big Bang” in London, except that US investments are “supernominally” exposed in the pre‐Big Bang period.

This study aims to investigate the effect of product market competition on the exposure of firms’ returns to consumption fluctuations (C-CAPM beta).

The C-CAPM beta comes from a regression of a stock’s returns against consumption growth, with controls for the Fama–French three factors and momentum. The Herfindahl–Hirschman index of concentration measures competition, with other measures like deregulation and tariff reductions used for robustness tests. Industries are categorized using different SIC digits, with the NAICS measure used for robustness tests. The C-CAPM beta is regressed to competition, with appropriate control variables, to find its relationship.

Higher levels of competition reduces the C-CAPM beta. The results are consistently robust to different measures of product market competition and industry identification.

Product market competition influences the sensitivity of systematic risk, as measured by the C-CAPM beta, to consumption, such that higher levels of competition reduce systematic risk.

This research contributes to a literature that admittedly is still murky, as the relationship between competition and systematic risk is still unsettled. No study (to the authors’ knowledge) examines the effect of competition on firms’ exposure to consumption. This research adds to the literature on the role of competition in risk, specifically with respect to consumption.

The purpose of this paper is to examine the effects of product market competition on capital spending (investments) financed by cash flow (CF), and the role of financial constraints (FC) on these effects.

The Herfindahl-Hirschman index of concentration measures competition. Earnings retention, working capital, the Kaplan and Zingales (1997) index and CF shortfalls measure FC. Regressions relating capital spending to competition are performed for the full sample, as well as financially constrained and unconstrained, and growth and value firms’ sub-samples. For robustness, large reductions in import tariffs are examined to exogenously measure competition, with the impact of these on capital spending tested via the difference-in-difference method.

The results show that competition fosters valuable investments when firms are financially unconstrained, especially for growth firms, and reduces these investments when they are financially constrained, especially for value firms.

The role of policy makers in alleviating FC should be focused toward growth firms that operate in competitive industries. As well, increasing financial pressure on value firms in competitive industries can have desirable effects, as it forces these firms to reduce investment inefficiency.

Many firm-specific and environmental factors drive the relation between competition and investment. Khanna and Tice (2000) find profitable firms increasing and highly levered firms decreasing investments in response to Wal-Mart’s entry into their markets. Jiang et al. (2015) suggest that environments with predictable growth drive a positive relation between competition and investments. This study claims that another factor that affects this relation is the firm’s level of FC.

This paper aims to examine the effects of lines of credit on a firm’s market timing behavior and the pricing of its seasoned equity offerings (SEOs). It shows that firms with lines of credit are more likely to time the equity market and receive less underpricing for their SEOs. It also shows that the propensity of firms with lines of credit to time the market is particularly significant for financially unconstrained firms. The results are robust to different measures of market timing and financial constraint, and these fill the gap in the literature that, to the best of the authors’ knowledge, has not examined the relation between lines of credit, market timing and value creation as related to equity offerings.

The paper first investigates the relationship between lines of credit and the probability of a firm issuing SEOs using a logistic model. The paper then investigates whether firms with lines of credit engage in market timing behavior using ordinary least square regressions with two-way cluster-robust standard errors (standard errors that are robust to simultaneous correlation along two dimensions, such as firms and time) with two measures of market timing and two measures for financial constraints. Finally, the paper examines the relationship between lines of credit and SEO underpricing.

It was found that firms with lines of credit are more likely to time the equity market, perhaps driven by the financing flexibility resulting from the existence of their lines of credit. This finding comes mainly from financially unconstrained firms, as such an effect is not observed among financially constrained firms with lines of credit. It is further shown that firms with lines of credit are more likely to experience less severe equity underpricing, perhaps owing to market timing behavior. The results provide evidence on how lines of credit may create value to a firm through its market timing.

The paper sheds new light on how lines of credit may create value to a firm through the market timing channel.

The effects of a proxy contest for control on a company are examined in this paper over a short, intermediate and long‐term post‐contest period of time. Major findings are as follows. First, compared to a non‐contest matchinggroup of firms, proxy contest for control firms as a whole are poor performers in the immediate post‐contest period. Successful contest firms, however, tend to improve performance whereas unsuccessful ones tend to deteriorate in the short‐term. Second, contest outcome does not appear to affect survivability over either the intermediate or long term. However, over the intermediate term, unsuccessful contest firms more often suffer losses and are acquired, and are less often involved in divestiture and expansion activities. Finally, in the long term, successful contest firms show a higher incidence of bank‐ruptcy and are more likely to engage in a name change.

The purpose of this paper is to apply safety‐first portfolio principles in an environment where financial risk exists because of the probability of terrorist attacks, where the catastrophic events of September 11, 2001 (911) are the focal point of the analysis.

Safety‐first portfolios of US equities bilaterally combined with 12 developed and emerging region global equity indices are obtained for 911. Extreme value theory and safety‐first principles are used to optimize these portfolios for US risk‐averse investors. The actual performances of all portfolios in the post‐911 period are compared to the optimal results. The robustness of the results is examined by replicating the analysis for the period following July 7, 2006, when no actual terrorist attacks occurred on US soil.

Optimal ex ante (ex post) safety‐first portfolios on 911 have high (low) US weights, and on July 7, 2006 low US weights. The differences are attributed to changes in market projections and/or conditions. In all cases, wealth is preserved even without the ex post optimal portfolios.

Safety‐first portfolio optimization can protect wealth given financial risks of extreme events like terrorist attacks.

The paper shows that quantitative assessments of financial risk are feasible, even though uncertainty with experts' risk assessments of extreme events such as 911 exists because of limited historical data and low probability of occurrence. The results are useful to investors developing international diversification strategies to protect wealth given the risks of terrorist attacks.

The purpose of this paper is to examine the impact of earnings smoothing on the underpricing of seasoned equity offerings (SEOs). It aims to investigate whether earnings smoothing can add value to firms by reducing the degree of SEO underpricing.

The sample of US common stock seasoned equity offerings (SEOs) by non‐regulated firms during 1989‐2009 was used to conduct various cross‐section, univariate, and multivariate tests, using several proxies for earnings smoothing, in order to confirm the impact of earnings smoothing on the degree of SEO underpricing. Three‐stage least square estimation was used to address the possible endogeneity of pricing and earnings smoothing.

Smooth earnings performance resulting from discretionary accruals is negatively related to SEO underpricing and improves earnings informativeness. Consistent with risk management and signaling theories, managers' efforts to produce smooth earning reports may add value to their firms. Based on the mean values for SEOs, such smoothing reduces underpricing by $0.33 per share offered and increases the value of the average offering by $1.65 million. Smoothed earnings also conveys information about the firms' future performance, as firms with a long historical pattern of smooth earnings prior to SEOs significantly outperform, for at least three years after the SEO, those with more volatile earnings, with respect to stock returns and operating performance.

The paper contributes specifically to the current literature on earnings smoothing by demonstrating that high quality firms that expect larger quantity of cash flows in the near future are more likely to actively smooth earnings via discretionary accruals before SEOs to reduce underpricing. The paper contributes generally by showing that firms can signal their quality to outside investors by showing smooth earnings over a long period of time and such firms are more likely to experience a lower degree of underpricing through SEO episodes.

This essay considers some of the negative effects of proxy contests and emphasizes that the proxy contest should be the choice of last resort. When costs are weighed against benefits, it would seem that there are better and cheaper ways for owners and managers to communicate and settle their differences. Recent research on this topic is considered and suggestions for research to judge the long‐term effects of proxy contests are offered. The essay concludes with some thoughts on how newly emerging corporate governance schemes may eventually obviate the need for proxy contests.

The Revolution is 50, Raúl has succeeded Fidel, and many dissidents who participated in the 2002 Varela Project initiative are in jail. What hope for “cambio” (change) in Cuba? Legal dissent – constitutional proposals, a legislative agenda, and grassroots civil rights organizing – may be the key. The Movimiento Cristiano Liberación (MCL), led by the Nobel Peace Prize-nominated Oswaldo Payá, presents the strongest challenge to the power of Cuba's 50-year-old Revolutionary government. This dissident group is at the heart of the development of the 2002 Varela Project and forms the core of the leaders arrested in the 2003 Cuban Spring crackdown. This paper traces the history of MCL's “legal dissent” strategy, from the evolution of the Varela Project to their development of an entire legislative agenda, crafted with nation-wide grassroots participation over the last six years since the crackdown. Using data from international NGO surveys conducted within Cuba, we analyze the strengths and weaknesses of the MCL's proposal vis-à-vis the political and economic concerns and interests of the broader population. Cuba's government seeks to consolidate its rule through its institutions, specifically, through the Cuban Communist Party. It remains to be seen whether the MCL's legal dissent strategy can successfully mobilize a broad segment of the Cuban population, and channel the political aspirations of reformers whose interests are not served under one-party rule.

Share repurchase programs are the most important form of payout, yet the implications of incomplete share repurchase programs have not been examined in previous literature. This study tests whether incomplete share repurchase programs are seen as a positive or as a negative signal by investors.

The perception of incomplete share repurchase programs by algorithmic traders, institutional investors and analysts is analyzed with structural equation models, seemingly unrelated regressions, propensity score matching and buy-and-hold abnormal returns on data from share repurchase programs in the United States. In contrast to previous literature, algorithmic trading is appropriately estimated as a latent variable, leading to more reliable results. Furthermore, decisions about share repurchases and dividends are appropriately modeled simultaneously and iteratively, based on findings from previous literature.

The results show that sophisticated investors such as algorithmic traders, institutional investors and financial analysts avoid incomplete share repurchase programs over a long-term investment horizon. Thus, incomplete share repurchase programs are interpreted as negative signals. Additional analyses reveal that share repurchase programs are not completed due to insufficient cash flow, as a result of financial difficulties. Overall, this implies that financial managers should be careful to announce share repurchase programs they know cannot be completed, similar to dividends that cannot be maintained over a long-term horizon.

This study is the first to consider incomplete share repurchase programs. The findings are of interest to scholars and practitioners, as this study goes beyond narrow repurchase program announcement windows, and instead focuses on the longer-term investment horizon over the life of the share repurchase program, which is often ignored in prior research.