Growth capital investing is the financing of growing businesses that are investing in tangible assets and the acquisition of other companies. Growth capital is common in retailing, restaurant chains, and health care management, and represents 12% of all venture capital (VC)-backed initial public offerings (IPOs). Since 1980, investing in growth capital-backed IPOs has produced mean 3-year style-adjusted buy-and-hold returns of +25.2%, in contrast to style-adjusted returns of approximately zero for other VC-backed and buyout-backed IPOs. One-third of growth capital-backed IPOs are rollups, and these have produced much higher returns for investors than rollups without a financial sponsor.
Vol. 50 No. 4 - November 2015
We examine the performance of U.S.-based foreign and global funds after controlling for their regional and style exposure. We show that, on average, the total performance and security selection abilities of both foreign and global funds are significantly negative and exhibit short- term predictability. Additionally, R2 reflects funds’ security selection abilities, consistent with previous findings for domestic mutual funds. Investors can earn higher abnormal returns and total performance in the short run by purchasing past winners with low R2 than by purchasing past losers with high R2. However, there is no evidence of predictability in the funds’ region- shifting and style-shifting abilities.
Proponents of separating the CEO and Chairman positions advocate having an outside chairperson, although having an inside chairperson can be valuable for some firms. I find inside chairs are more likely where firm-specific human capital is more important and, in these firms, inside chairs are associated with higher firm valuation and better operating performance. Furthermore, skilled inside chairs increase forced CEO turnover sensitivity to performance. The evidence suggests that certain inside chairs can be valuable when firm-specific information is important for monitoring and an outside chair may be costly.
Investors globally prefer dividend-paying stocks over non-dividend-paying stocks more in declining than in advancing markets, even accounting for firm-level growth opportunities, size and risk effects. Dividend paying stocks outperform non-dividend paying stocks, from 0.63 (China) to 3.79 (Canada) more per-month in declining than in advancing markets. In declining markets, dividend paying firms outperform by more than any under-performance in advancing markets. The results are robust across dividend taxation regimes, legal environments, emerging and developed markets, periods prior to and after the 2008 global financial crisis, the exclusion of the dividend declaration month and in respect to segmented or integrated international capital markets. Click here for the paper.
We study the determinants of fails-to-deliver in the period before and after the implementation of Rule 203 (elimination of option market maker exception from the locate and close-out requirement) and Rule 204 (t+3 close-out rule) in September 2008. We find a positive relationship between short selling and fails-to-deliver that weakens after the implementation of these rules. Fails-to-deliver are higher for stocks with low institutional ownership, low book to market, small market capitalization, high turnover, and put option availability. The relationship between short selling and these measures of borrowing costs is also weaker after the implementation of these rules.
This study finds that, over short horizons, herding by short-term institutions promotes price discovery. In contrast, herding by long-term institutions drives stock prices away from fundamentals over the same periods. Furthermore, while the positive predictability of short-term institutional herding for stock prices is more pronounced for small stocks and stocks with high growth opportunities, the negative association between long-term institutional herding and stock prices is stronger for stocks whose valuations are highly uncertain and subjective. Finally, we show that the destabilizing effect of institutional herding persistence documented in the recent literature is entirely driven by persistent herding by long-term institutions.