Contributions published at Finance (Per Nils Anders Östberg)

This thesis examines how robust the betting against beta strategy by Frazzini and Pedersen (2014) is when applying more conventional procedures, i.e. betas are estimated differently and the BAB portfolio is being constructed by a valueweighting instead of a rankweighting approach. This study finds a BAB factor which earns statistically significant and positive risk-adjusted returns for all the approaches. Besides, it finds that when funding constraints tighten only the rankweighted BAB factor is low and only rankweighted betas are compressed towards one when funding liquidity risk increases.

This thesis investigates the Swiss cross-border mergers and acquisitions landscape and the factors associated with the flow of the deals. In particular, it studies the correlation of macroeconomic variables such as the exchange rate, equity returns, bond yield, GDP growth, and inflation rate with the direction of cross-border deals between Switzerland and Germany, France, Italy, UK, and US. The findings suggest that the macroeconomic factors are important in the cross-border transactions flow, however each of them has a different correlation with the deal direction depending on the country of interest. For instance, in some countries such as Germany, when the bond yield increases, the firms prefer to invest in countries with a lower yield, while in another countries such as US and Italy, when their bond yield decreases they look for investment opportunities in higher yield countries. Among the significant results, there are some variables that have consistent behavior such as the inflation rate and GDP growth rate such that when the rates are increasing in the acquiror country, there are more foreign acquisitions being performed.

This thesis provides empirical evidence on operating performance in U.S. domestic mergers in manufacturing industries by comparing pre-merger to post-merger cost of goods sold (COGS), as well as by computing abnormal announcement stock returns. For a sample of 153 acquisitions, no significant difference in pre- and post-merger performance is found. However, target and particularly acquiring firms seem to significantly outperform industry median firms in the pre-merger period. Whereas for the stock returns, a weighted portfolio of acquirer and target shareholders’ abnormal returns is significant, the influence of operating performance on returns is only significant for target shareholders.

This paper investigates the effect of the macroeconomic environment on the inbound, outbound and domestic deal activity in Switzerland between 1990 to 2019. Additionally, the relation between the level of premium paid in the three deal types and the macroeconomic environment in Switzerland is examined. Empirically, this thesis shows that the macroeconomic environment in Switzerland has some influence on the outbound and domestic deal activity in Switzerland. Moreover, the results suggest that the macroeconomic factors have no significant influence on the inbound deal activity, as well as on the premiums paid in all three deal types.

The thesis investigates the initial returns and aftermarket performance of 52 IPOs on SIX Swiss Exchange from 2000 to 2015. Over this period, the Swiss IPOs show an average adjusted initial return of 9.22%. We provide evidence that the magnitude of underpricing was larger during the hot markets of 2000, 2006 and 2007 and is directly related to the degree of ex-ante uncertainty around the firm. In the long run, the IPOs significantly underperform the benchmark. The empirical analysis does not reveal any evidence that underperformance of Swiss IPOs is consistent with the fads scenario and overreaction hypothesis.

This thesis uses logistics regression and event study method to investigates how share pledges affect the share repurchase activities in China. The research results confirm companies and shareholders could use share repurchase to support stock price in order to avoid the loss of control right when they have share pledges and face margin call pressure. In addition, the research on market reaction of share repurchase announcement under share pledge show that the short-term CAR of share repurchase announcement is positive and significant. The market reaction is less positive if controlling shareholders’ pledge ratio or company’s pledge ratio is higher.

This thesis examined whether there is a positive relation between future stock returns and illiquidity in Switzerland. Using Fama and MacBeth (1973) regressions and the Amihud (2002) illiquidity measure, no significant relation between liquidity and future stock returns was found. Furthermore, the effects of liquidity and size were difficult to distinguish. The use of an alternative price impact measure showed that this relation is partly due to the Amihud (2002) illiquidity measure. Moreover, the alternative measure stressed the importance of including trading frequency, but did not support the hypothesis of a significant return-liquidity relation. These results suggest that liquidity effects reported on other stock exchanges and at different times cannot be generalized for Switzerland.

This thesis firstly investigates the low-beta anomaly in Switzerland. After having verified an empirical SML flatter than the one predicted by the classic CAPM, this thesis applies in the Swiss market, the dynamic model with borrowing constraints and margin requirements, developed by Frazzini and Pedersen (2014). Almost all empirical results are consistent with the model central predictions: (1) low-beta portfolios have a higher alpha than high-beta ones while their exhibits a comparable average excess return. (2) A zero-beta self-financing portfolio that is long leveraged in low-beta stocks and shorts the high-beta ones, called betting against beta (BAB) factor, produces significant positive risk-adjusted returns. (3) Stocks’ betas are compressed toward one when funding liquidity risk increases. Moreover, this thesis finds that the introduction in late 2011 of the CHF/EUR peg has had a negative impact on the BAB performance. However, the empirical results do not confirm statistically the relationship between the strong BAB performance and borrowing constraints.

This thesis examines earnings management practices prior to M&A announcements in the United Kingdom (UK), taking into consideration both streams of earnings management literature: real activities manipulation and accruals manipulation. Consistent with predictions, I nd that, on average, UK stock acquirers have lower discretionary expenditures and therefore engage in signicantly higher income-increasing earnings management than cash acquirers in the year prior to the merger announcement. However, there is no evidence that stock acquirers in the UK themselves engage in signicantly more real activities manipulation through the reduction of discretionary expenditures in the year before the announcement year. No evidence of earnings manipulation can be found for all other earnings management proxies. To check that the motive for undertaking incomeincreasing earnings management is to increase prices temporarily, short- and long-term performance are tested. Even though results suggest that acquirers with high earnings management in the scal year ahead of the announcement year underperform more in the long run than acquirers with low earnings management, there is no evidence of overperformance in the short run, which is not in line with predictions. Overall, the results are mixed and it can be concluded that UK acquirers do not manage earnings ahead of M&A announcements as much as expected.

This thesis aims to investigate the link of rm attractiveness and CEO turnover decisions relying on a unique data set of CEO turnovers in Switzerland. Based on a rm's press coverage, a measure for rm attractiveness is constructed to examine its eect on turnovers' underlying strategic motives and the ability to attract potential candidates. It is found that less attractive rms opt for turnovers accompanied by stronger strategic implications while more attractive rms focus on minimizing transition costs. The analysis of resulting CEO-rm matches provides only weak evidence in favor of more attractive rms' ability to attract superiorly skilled CEOs.

I document the difference in sensitivity to interest rate change, that stocks with different dividend yield characteristics exhibit as well as how this sensitivity changes as the economy moves into low interest rate periods. Additionally I inquire about the presence of a difference in reaction to interest rate changes in the short term, specifically during the FOMC Fed Funds Target Rate announcements, evaluating both the reaction to the expected as well as the unexpected portion of the change in the Fed Funds Target rate. Finally I evaluate the existence of a difference in short term price drift immediately before and after the FOMC announcement day. The results of the analysis prove the existence of a difference in interest rate sensitivity between high and low dividend yield stocks. Additionally after analysing different interest rate periods, I prove that this interest rate sensitivity of high dividend yield stocks becomes stronger in the most recent extremely low interest rate period that came after the financial crisis of 2008. In the short term I present findings that back up the theory that no observable difference in reaction between high and low dividend yield stock is present both in the reaction to the FED Funds Target Rate, as well as with regards to the pre-FOMC meeting drift. Finally I discuss possible explanation for these observations based on the Clientele and the "Reaching for Dividends" hypothesis.

This thesis employs the event study methodology to examine the effects of index demand using data from MSCI Index inclusions. On the announcement day, stock returns and volumes increase significantly. The positive return-volume relation means the demand curve for the affected stock is down sloping. However, the mean cumulative abnormal return across the total permanent window remains unchanged, suggesting that the long-run demand curve is horizontal, consistent with the price pressure hypothesis. Moreover, this thesis presents a thorough analysis of liquidity and price informativeness which may be related to price effects. The results reject liquidity hypothesis and are partially in support of the stock informativeness effects. Keyword: event study; Index additions; downward sloping demand curve; liquidity; price informativeness

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The purpose of this thesis is to analyze the effect of the announcement of corporate illegalities on the stock prices of Russian non-financial companies in the short term and the long term. The short term results show that here is no effect on the stock prices regardless of the company's sector, type of crime or repeatedness of the illegality. However, the timing of the allegations is found to be important: crimes announced during the dimes of crisis in the economy yield a significant negative effect. In the long term no effect is found, regardless of the timeframe after the announcement.

I study the effect of high product market competition on financial leverage through collateral channel assuming that a high number of potential buyers who can redeploy production assets at low costs increases salability of pledged assets. I test four competition measures on the state- and country-level and explore how the magnitude of the effect depends on the relative size of companies in the industry. I find that the collateral channel effect of competition is a strong determinant of the capital structure that gains importance during economic recessions. My results are consistent with findings in prior literature that the quantity of peer firms is related positively to loans' recovery rates and negatively to credit spreads.