Essays On Information Transmission In Firm Networks And Financial Market Implications
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Essays On Information Transmission In Firm Networks And Financial Market Implications
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Author : Christoph Maximilian Schiller
language : en
Publisher:
Release Date : 2019
Essays On Information Transmission In Firm Networks And Financial Market Implications written by Christoph Maximilian Schiller and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This thesis consists of three chapters on firm-level production networks, information production and dissemination, and their impact on corporate policies and investment decisions. Chapter 1 provides an introduction of the essays and summarizes their main findings. Chapter 2 examines the role of international supply-chain relationships for the transmission of corporate Environmental and Social (E) policies, and the resulting impact on real E outcomes and firm performance. E policies propagate from customers to suppliers, especially when customers have higher bargaining power and suppliers are in countries with lower ESG standards. This transmission mechanism matters: suppliers subsequently reduce their toxic emissions, litigation and reputation risk decreases, and financial performance improves. Chapter 3 develops a measure for the speed of information diffusion along supply-chains and documents a causal relationship between the attention of key market participants, i.e. dual-covering analysts and cross-holding institutional investors, and the speed measure. The speed of information diffusion plays an important role for feedback effects from stock prices to corporate investments: supplier managers rely more on information in customer (supplier) stock prices when the speed of information diffusion along the supply chain is slower (faster). Consequently, the diffusion speed affects the coordination of relationship-specific investments between customers and suppliers and future operating performance of suppliers. Chapter 4 shows that international supply-chain links are an important channel for the propagation of financial contagion around the world. Following large country-level shocks, such as market-index jumps or natural disasters, dynamic conditional correlation (DCC) between U.S. suppliers and their foreign customers increases significantly, beyond country-level and industry effects. Consistent with a credit-chain mechanism, the effect is asymmetric for positive and negative shocks, more pronounced for supply-chain pairs with a closer relationship, higher leverage, lower cash holdings and firm profitability, and increases with the costs of bankruptcy resolution in the customers countries.
Essays On Information Diffusion And Stock Markets
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Author : Aaron Paul Burt
language : en
Publisher:
Release Date : 2017
Essays On Information Diffusion And Stock Markets written by Aaron Paul Burt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Stock exchanges categories.
My dissertation is a compilation of three separate research studies that explore how information diffuses in financial markets. The first chapter examines how non-uniform information diffusion through distinct networks segments U.S. financial markets. Using changes in newspaper ownership networks, I document that a network link between different geographic areas leads to increased comovement of turnover and returns between stocks headquartered in those areas. Consistent with delayed content sharing within a network, the largest increase in comovement is observed using weekly data. I show that the network-driven comovement is not driven by fundamentals and is weaker for large firms with high institutional ownership and decreases over time. I also document that a network link causes price levels of linked stocks to become more similar. My findings show that segmented information networks lead to segmented financial markets with implications for market efficiency, home bias, and the effects of changes in the U.S. media landscape on financial markets. The second chapter shows that investors do not fully monitor the information about directors available in the past prices of firms within the network the directors oversee. A long-short portfolio using this information yields an annual alpha of 6.6%. This predictability is limited to when firms share a director and is not driven by industry or previously identified economic links between firms. The predictability is largest in the long end, when small firms predict big firms, and when information on shared directors is costlier to obtain. Trading by the shared directors is a key mechanism: filtering on their trades increases the annual alpha to 15%. The third chapter studies the econometric properties of a commonly used network-based measure of information diffusion between economically linked firms. Previous studies use this measure to document failures of market efficiency with price discovery requiring up to a year. The measure is constructed as the long-short alpha of portfolios formed sorting on the preceding returns of firms economically linked to portfolio firms. We show that correlated alphas between linked firms bias these measures. Existing studies have monthly biases as large as a factor of two. This bias creates predictability even after price discovery completes. Subtracting the predicted return from the sorting firms' returns removes this bias. Eliminating this bias reveals a more efficient market than previously documented: price discovery takes one month.
Three Essays On The Role Of Information Networks In Financial Markets
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Author : Swasti Gupta-Mukherjee
language : en
Publisher:
Release Date : 2007
Three Essays On The Role Of Information Networks In Financial Markets written by Swasti Gupta-Mukherjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Capital market categories.
Based on previous evidence that there are information heterogeneities in capital markets, three essays including empirical frameworks for examining the information processes that impact portfolio investments and corporate investments was proposed. The first essay considers information channels among mutual fund managers (fund-fund networks), and between holding companies and fund managers (fund-company networks). Results show that (1) fund-fund (fund-company) information networks help in generating positive risk-adjusted returns from holdings in absence of fund-company (fund-fund) networks; (2) fund-company networks create information advantage only when the networks are relatively exclusive. Superior networks seem to pick stocks which outperform beyond the quarter. The second essay examines mutual fund managers' tendency to deviate from the strategies of their peers. Results indicate a significantly negative relationship between the managers' deviating tendency and fund performance, suggesting that the average fund manager is more likely to make erroneous decisions when they deviate from their peers. The third essay investigates the determinants of target choices in corporate acquisitions. Results reveal the influence of various factors, including information asymmetries, which may drive this behavior, including economic opportunities, anti-takeover regimes, competitive responses to other managers, and acquirers' size and book-to-market ratios.
Three Essays On Information Transmission In Financial Markets
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Author : James Clifford Hackard
language : en
Publisher:
Release Date : 2006
Three Essays On Information Transmission In Financial Markets written by James Clifford Hackard and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Econometrics categories.
Essays In Information And Contracts In Financial Markets
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Author : Gregory William Weitzner
language : en
Publisher:
Release Date : 2020
Essays In Information And Contracts In Financial Markets written by Gregory William Weitzner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
My dissertation contains two chapters. In chapter one I explore the relationship between debt maturity and information production in a theoretical model. In my model, long-term financing creates an excessive tendency for financiers to acquire information and screen out lower quality borrowers. In contrast, short-term financing deters information production at origination but induces it when firms are forced to liquidate, depressing the market value of assets due to adverse selection. Through the feedback effect between firms' maturity structures and asset prices, increases in uncertainty can impair the aggregate volume of short-term financing and investment. The analysis can jointly rationalize i) the widespread use of short-term debt by financial firms, ii) periodic disruptions in short-term funding markets and iii) regulations that curb short-term funding markets in normal times and support them in periods of market stress. In the second chapter, I analyze information externalities in the interbank market. In the model, banks use their information to adjust the size of loans rather than the prices they offer to counterparties because of adverse selection. Each banks' individual rationing decision creates an information externality that increases the efficiency of trade. This information externality occurs even though information is not shared and banks compete with each other. However, banks do not internalize the cost their contracts impose on other banks through the counterparty's likelihood of default, which creates a counteracting negative externality that exacerbates as the number banks increases. The model provides a microfoundation for interbank discipline and has implications for the optimal structure of interbank markets
Essays On Financial Intermediaries In Capital Market
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Author : Yuqi Han
language : en
Publisher:
Release Date : 2022
Essays On Financial Intermediaries In Capital Market written by Yuqi Han and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
My dissertation consists of three chapters that examine how information production by financial intermediaries impacts on the capital market.My first chapter investigates whether extreme but rare events, i.e., major climatic disasters, influence the productivity of professional financial analysts, whose output is highly crucial in the capital market. We use 21 major natural disasters in the U.S. and find that disaster-zone analysts reduce their forecast accuracy by reiterating their previous forecast within 3 months after disasters. This effect is driven by distracted attention, rather than resource constraints. Though the effect is short term, we reveal a spillover negative impact from climatic disasters to information environment of firms which do not experience disasters, via the channel of disaster-zone analysts, highlighting the importance of the financial intermediary and also the economic consequences of severe climate events. My second chapter is motivated by the increasing global expansion by U.S. firms in recent decades and examines how geographic distribution of U.S. firms' offshore network affects the coverage incentive of non-U.S. analysts. We combine analyst country location database and the novel dataset of offshore activities by Hoberg and Moon (2017) who quantify a U.S. firm's local exposure in a foreign country and we discover that foreign analysts, are more likely to initiate coverage of U.S. firms with offshore activities in their domiciled countries and provide more accurate forecasts compared to non-domiciled foreign analysts. This study uncovers an important channel, i.e., offshore network, through which non-U.S. analysts can contributes to U.S. market with information advantage. In my third chapter, I study an emerging group of equity analysts, i.e., social media analysts, who post equity research on social media platforms and share investment opinions. I employ initial public offering (IPO) as a laboratory setting because during pre-IPO period, a period with high information asymmetry, professional sell-side analysts are restricted to issue reports under the restriction enforced by SEC, which provides a great setting to study the informational role of this group. I exploit research articles on Seeking Alpha website and find that pre-IPO social media analyst coverage has a positive impact on first day initial return, with the effect driven by heightened retail investor attention. This study highlights the role of social media analysts, as a new information intermediary in the capital market during the internet era.
Essays On Information Acquisition And Asset Pricing
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Author : Paul Marmora
language : en
Publisher:
Release Date : 2015
Essays On Information Acquisition And Asset Pricing written by Paul Marmora and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
In this dissertation, I explore different mechanisms by which information is generated in financial markets, and whether these mechanisms can account for empirical anomalies that models without information choice have difficulty explaining. In the first chapter, I survey the theoretical literature on perfectly competitive asset markets, with a particular focus on rational expectations models with endogenous information acquisition. In the second chapter, ``The Distribution of Information, the Market for Financial News, and the Cost of Capital", I present a rational expectations model with a competitive market for financial news that provides an explanation for why stocks with a higher degree of information asymmetry tend to earn higher expected returns. I demonstrate that when a small fraction of investors hold a large fraction of a firm's private information, few investors demand a copy of firm-specific news in equilibrium. As a result, each investor must incur a larger share of the fixed cost of news production to obtain a copy, which deters investors from learning more about the firm and therefore raises their required risk premium. This result hinges crucially on the ability of investors to share in the fixed cost of news production, which suggests that the financial news media plays an important role in determining how the cost of capital varies with the inequality of information across investors. In the third chapter, ``Learning About Noise" (with Oleg Rytchkov), we study theoretical implications of endogenous acquisition of non-fundamental information in financial markets. We develop a rational expectations model with heterogeneous information and multidimensional costly learning and demonstrate that i) investors specialize in information acquisition, that is, those who are endowed with high (low) quality information about fundamentals learn only about fundamentals (noise), ii) learning about fundamentals increases the asymmetry of information, whereas learning about noise decreases it, and iii) the opportunity to learn about noise unambiguously increases price informativeness.
Essays On Networks And Corporate Finance
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Author : Tatiana Igorevna Salikhova
language : en
Publisher:
Release Date : 2019
Essays On Networks And Corporate Finance written by Tatiana Igorevna Salikhova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with Business networks categories.
In my dissertation I explore how personal networks affect firms' financial decisions. In the first essay, I study how social connections among divisional managers affect the capital allocation to divisions in diversified conglomerates. In contrast to the previous studies, I focus on the horizontal connections or connections formed among managers of the same level of corporate hierarchy. I show that connections among divisional managers lead to higher sensitivity of segment capital spending to segment's growth opportunities, higher firm-level allocation efficiency and higher firm value. Additionally, firms tend to strategically assign better-connected managers to these segments, and connections help to reduce internal information asymmetry. The results are consistent with the idea that connections facilitate interdivisional cooperation and better alignment of divisional and firm's incentives. In the second essay, I examine capital structure decisions of suppliers with social connections to major customers, which invest in relation-specific assets. Suppliers connected to major customers with relation-specific assets have higher debt ratios. The effect is more pronounced when intensity and duration of business relationship is high, and when information asymmetry between parties is high. In addition, building up debt helps suppliers to reduce underleverage and move faster toward target leverage ratios. Overall, the results are consistent with the view that connections help to strengthen implicit contracts through establishing trust between trading parties. In the third essay, I study the effect of divisional manager-CEO social connections on the scale and success of corporate innovation activities. Divisional managers who previously worked or studied with CEO file a greater number of patents during their tenure at the segment. These patents receive more citations in future and represent a greater scientific and economic value. These findings can imply that socials connections help to mitigate adverse selection problems associated with R&D investments.
Powering The Digital Economy Opportunities And Risks Of Artificial Intelligence In Finance
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Author : El Bachir Boukherouaa
language : en
Publisher: International Monetary Fund
Release Date : 2021-10-22
Powering The Digital Economy Opportunities And Risks Of Artificial Intelligence In Finance written by El Bachir Boukherouaa and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-10-22 with Business & Economics categories.
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
American Doctoral Dissertations
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Author :
language : en
Publisher:
Release Date : 2001
American Doctoral Dissertations written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Dissertation abstracts categories.