Contributions published at Finance (Per Nils Anders Östberg)

A paper by Modigliani and Miller (1958) started the capital structure discussion and has inspired many scholars to study this field of corporate finance. Their widespread irrelevance proposition was the fundament on which many theories have evolved. Most of these theories explain the variation in capital structure through firm-specific factors that either affect the costs and benefits of debt, as in the trade-off theory or that affect the need of financing in the first place as in the pecking order theory. But not all of these factors lie in the hands of the decision-making executives. On top of firm-specific factors, costs and benefits of debt depend on macroeconomic factors. The same holds true for the need of financing, i.e. when there is an economic boom, firms might not need outside funds at all. Theories on the effect of macroeconomic factors on leverage are underdeveloped. Only recently, scholars have started to pay attention to these factors. Scholars like Hackbarth, Miao and Morellec (2006) have analyzed macroeconomic factors and concluded that the benefits and costs of debt depend on the state of the economy. Other factors that in theory should affect leverage, but are not sufficiently examined for Switzerland, are stock market conditions, expected inflation, interest rates, credit market conditions and the exchange rate of the Swiss franc to foreign currencies. This thesis describes the current state of theories, focusing on the most widespread explanations and establishes a connection to macroeconomic factors. It then focuses on relevant empirical evidence and tries to adopt this evidence to Switzerland by performing a similar analysis.

The research question of this master thesis is twofold, namely whether or not the frequently changing IPO system and regulations have an impact on IPO underpricing in China and whether or not the adverse selection model as a sub-branch of information asymmetric models is able to explain the persistent IPO underpricing in China regardless of changes in regulations. Two major steps have been made so as to answer this twofold research question.

This study analysis abnormal returns of 1’302 M&A announcments of Finnish, Danish, Dutch, Swedish and Swiss acquirers between 2005 and 2013 to shed light on the relation of industry specialization and the effect of diversification. Defining industries and diversification at the two-digit SIC code level, I find significant evidence for a diversification discount for acquirers operating in highly specialized industries, compared to acquirers operating in low specialized industries. A special focus is set on Switzerland, as the most competitive country in the world. Data provides evidence that returns to Swiss acquirers are different compared to acquirers of the peer group.

This thesis investigates the motives of Swiss acquirers to engage in cross-border transactions and the sources of gains and losses of these transactions in the light of different motives. The empirical results show that the primary motive of Swiss acquirers is synergy in takeovers with positive total gains, whereas agency is the main motive in transactions with negative total gains. Furthermore, the coexistence of different sources of gains is proved. The analysis provides evidence for reverse internalization and assets sharing as sources of gains in synergetic transactions, but no evidence is provided for sources of losses.

null

This thesis investigates the influence of corporate credit ratings on the choice of payment method in M&A. Based on a sample of deals with European public acquirers, the different statistical computations indicate no relation between credit ratings and the likelihood to settle a transaction with cash. It is also demonstrated that the fnancial crisis impacted the explanatory power of credit ratings. These results are attributable to managers fearing to lose their firms ratings when engaging in debt financed deals, the loss of reputation of rating agencies and the lower ratings accuracy.

Stock market investment decisions of individuals are positively correlated with that of co-workers. Sorting of unobservably similar individuals to the same workplaces is unlikely to explain our results, as evidenced by the investment behavior of individuals that move between plants. Purchases made under stronger co-worker purchase activity are not associated with higher returns. Moreover, social interaction appears to drive the purchase of within-industry stocks; an investment mistake. Overall, our results suggest a strong influence of co-workers on investment choices, but not an influence that improves the quality of investment decisions.

This study examines whether differences in merger announcement returns between the payment methods cash and stock are attributable to capital gains taxation of private individuals. Previous research shows that premia of cash others are higher than those of stock others in countries where stock payments provide taxation beneits for target shareholders. We investigate a sample of 12,388 merger announcements in OECD countries during the period 1989-2014. We find that cash and stock offer premis do not statistically differ in countries without capital gains taxation including Switzerland. In addition, overall premia in cash-for-stock offers are smaller in these countries.

null

null

The Morningstar star rating is the best known rating for investment funds. Investors are highly influenced by the ratings given to funds shown with fund flows. In the thesis, net returns of European domiciled Global Large Cap Blend retail funds from 2005 to 2014 are analyzed to test the predictive ability of the rating. The model used is the Fama French with Momentum with monthly return data. The results show two things about fund performance: first, the funds are generally unable to cover their costs; and second, the rating shows some predictive power over a one-year period.

null

null

null

This study examines the effect gold hedging has on the value of gold mining companies. The sample contains data from 20 of the largest gold producers in the gold mining industry between 2003 and 2012. When controlling for size, profitability, leverage, investment growth and cash costs, no relationship is found between hedging and Tobin’s Q. This may be due to endogeneity problems, the fact that hedging has no effect on firm value or that hedging is a result of managers reducing their personal risk.

We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external financing we find that firms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that undertaking an open market repurchase results in a significant reduction in the size of the shareholder base. Consequently, we find that firms with small shareholder bases are less likely to undertake a repurchase (reduce the shareholder base even further) and are more likely to pay special dividends.

null

null

null

Average Abnormal- and Cumulated Percentage Returns of public acquirers domiciled in Switzerland show significant positive return signs surrounding acquisition announcements for the period of 1980 to 2011. Average Cumulated Abnormal Percentage Returns being a significant 1.1% for bidding and 22.6% for targeted firms. 126 substantial as well as statistical and economical significant transactions generate 33 billion Swiss Francs of shareholder wealth, returning eight centimes for every Swiss Franc invested. Over two-thirds being accounted by just fourteen firms. Post-takeover announcement long-term performance showed a significant Average Abnormal Buy-and-Hold Return of 11.7% twelve months after the announcement.