Reusing Natural Experiments

Heath, Davidson; Ringgenberg, Matthew C.; Samadi, Mehrdad; Werner, Ingrid M.

doi:10.17016/ifdp.2022.1339

Cited by 3 publications

(8 citation statements)

References 0 publications

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“…Our findings from a fitted crash, obtained from the 1st stage regression, support our baseline specification results and pass the conventional t-statistics. Heath et al (2023) discuss the potential concerns arising from the same instrument being used for multiple objectives. We follow Heath et al (2023) and use their suggested heuristic that our results should pass the t-statistics of 3.00.…”

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

“…Heath et al (2023) discuss the potential concerns arising from the same instrument being used for multiple objectives. We follow Heath et al (2023) and use their suggested heuristic that our results should pass the t-statistics of 3.00. Heath et al (2023) use the correction method from Wolf (2005, 2016) and suggest adjusting t-statistics to address the multiple testing concern.…”

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

“…We follow Heath et al (2023) and use their suggested heuristic that our results should pass the t-statistics of 3.00. Heath et al (2023) use the correction method from Wolf (2005, 2016) and suggest adjusting t-statistics to address the multiple testing concern. Our results pass the adjusted t-statistics except for INVEFFIC, one of the proxies for measuring investment efficiency.…”

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

“…(2023) discuss the potential concerns arising from the same instrument being used for multiple objectives. We follow Heath et al . (2023) and use their suggested heuristic that our results should pass the t -statistics of 3.00.…”

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

See 3 more Smart Citations

How does management respond to stock price crashes?

Roy,

Marshall,

Nguyen

et al. 2023

IJMF

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PurposeThe purpose of this study is to investigate (1) how managers respond to stock price crashes, (2) why they respond and (3) how their responses affect shareholders.Design/methodology/approachThis study employs a panel regression with various firm-level controls and firm- and year-fixed effects. The sample is comprised of 101,532 firm-year observations with 11,727 unique firms from 1950 to 2019. Using mutual fund flow redemption pressure as an exogenous variable to stock price crashes, the paper provides further evidence of the causality of documented findings.FindingsManagement becomes more focused on improving transparency, raising investment efficiency, reducing agency conflicts and regaining the trust of shareholders by investing in social capital and employee welfare. These actions increase firm value. This study also suggests that management undertakes these actions out of concern for their tenure of employment.Originality/valueThe catalysts of stock price crashes are well documented, but much less is known about what happens following stock price crashes. This study provides more insights into the understanding of corporate crisis management practices following adverse events.

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Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

Section: Mutual Fund Flow Hypothetical Sale As An Exogenous Variablementioning

confidence: 99%

See 2 more Smart Citations

How does management respond to stock price crashes?

Roy,

Marshall,

Nguyen

et al. 2023

IJMF

View full text Add to dashboard Cite

show abstract

“…One concern is that broker house mergers and closures have been used in several existing studies raising Heath et al (2023). provide adjusted critical values depending on how many previous outcomes have been examined using the same setting.…”

mentioning

confidence: 99%

Financial debt contracting and managerial agency problems

Imbierowicz,

Streitz

2024

Financial Management

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This paper analyzes if lenders resolve managerial agency problems in loan contracts using sweep covenants. Sweeps require a (partial) prepayment when triggered and are included in many contracts. Exploiting exogenous reductions in analyst coverage due to brokerage house mergers and closures, we find that increased borrower opacity significantly increases sweep use. The effect is strongest for borrowers with higher levels of managerial entrenchment and if lenders hold both debt and equity in the firm. Overall, our results suggest that lenders implement sweep covenants to mitigate managerial agency problems by limiting contingencies of wealth expropriation.

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The impact of shareholder litigation risk on income smoothing

Li,

Song,

Sun

et al. 2023

Rev Quant Finan Acc

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This paper investigates whether and how shareholder litigation influences income smoothing. Using the ruling of the Ninth Circuit Court of Appeals in 1999 as an exogenous shock to the threat of litigation, we find that the increasing difficulty of class action lawsuits decreases income smoothing. This finding is robust to different model specifications. We also show that such an effect is stronger for firms that are more likely to face greater pressure from the threat of shareholder litigation risk. Overall, our findings extend the literature on investigating how class action lawsuits can affect the motivation of income smoothing.

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Reusing Natural Experiments

Cited by 3 publications

References 0 publications

How does management respond to stock price crashes?

How does management respond to stock price crashes?

Financial debt contracting and managerial agency problems

The impact of shareholder litigation risk on income smoothing

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