Browsing by Author "Clark, Ephraim"

Now showing 1 - 8 of 8
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    Convexity, magnification, and translation: The effect of managerial option-based compensation on corporate cash holdings
    (Blackwell Publishing Ltd, 2014-06-11T00:00:00Z) Belghitar, Yacine; Clark, Ephraim
    Using the distinctions among the convexity, magnification, and translation effects, we identify the pertinent parameters and examine empirically the relation between cash holdings and option-based managerial compensation. We show that changes in delta reduce the effects of magnification and convexity on managerial risk aversion. We also provide evidence that there is a negative relation between the option-based incentives delta and vega and cash holdings. These results are robust when incentives are extended to include all executive board members and when the sample is broken down according to different risk characteristics.
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    Does it pay to be ethical? Evidence from the FTSE4Good
    (Elsevier, 2014-07-08) Belghitar, Yacine; Clark, Ephraim; Deshmukh, Nitin
    The empirical mean–variance evidence comparing the performance of Socially Responsible Investments (SRI) and conventional investments suggests that there is no significant difference between the two. This paper re-examines the problem in the context of Marginal Conditional Stochastic Dominance (MCSD), which can accommodate any return distribution or concave utility function. Our results provide strong evidence that there is a financial price to be paid for socially responsible investing. Indices composed of socially responsible firms are MCSD dominated by trademarked indices composed of conventional firms as well as by indices carefully matched by size and industry with the firms in the SRI indices. Zero cost portfolios created by shorting the SRI index and using the proceeds to invest in the conventional index generate higher average returns, lower variance and higher skewness than either of the two indices standing alone. They also MCSD dominate the SRI and conventional indices standing alone.
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    The effect of exchange rate fluctuations on the performance of small and medium sized enterprises: Implications for Brexit
    (Elsevier, 2021-03-17) Belghitar, Yacine; Clark, Ephraim; Dropsy, Vincent; Mefteh-Wali, Salma
    This paper develops an innovative technique that takes into account the time varying nature of exchange rate (XR) exposures and separates these exposures into those that increase stock market returns and those that reduce them to study the effect of XR fluctuations on the performance of UK small and medium sized enterprises (SMEs). It provides evidence that XR fluctuations have a strong negative effect on SME performance at the industry and individual firm level for both depreciations and appreciations of the GBP against the USD and a residual index of all other currencies except the euro. For the euro, the exposures are much smaller at the industry level and generally not statistically significant. At the firm level they are also more evenly divided between performance enhancing and performance decreasing. Differences of exposures to currency variations between export-oriented firms and domestically-focused firms are also analyzed. Our results have policy implications for Brexit.
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    Foreign currency derivative use and shareholder value
    (Elsevier Science B.V., Amsterdam., 2013-09-30T00:00:00Z) Belghitar, Yacine; Clark, Ephraim; Mefteh, Salma
    This paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing overall FC exposure but there is no evidence of value creation through the application of a program that identifies and targets only loss causing exposures. We also find that FC derivative use has no significant effect on firm value in the overall sample and when the sample is broken down by eThis paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing overall FC exposure but there is no evidence of value creation through the application of a program that identifies and targets only loss causing exposures. We also find that FC derivative use has no significant effect on firm value in the overall sample and when the sample is broken down by exposure type and derivative product.
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    Importance of the fund management company in the performance of socially responsible mutual funds
    (Wiley, 2017-09-01) Belghitar, Yacine; Clark, Ephraim; Deshmukh, Nitin
    We compare the performance of a sample of U.K.-based socially responsible investment (SRI) funds with similar conventional funds using a matched-pair analysis based on size, age, investment universe, and fund management company (FMC). We find that both the SRI and conventional funds outperform the market index about 50% of the time, even after fees. Subsample tests show that the SRI funds in our sample perform better in the pre- and postfinancial crisis periods but underperform during the financial crisis period. Importantly, we find that the FMC plays a major role in the outperformance of both SRI and conventional funds.
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    A measure of total firm performance: new insights for the corporate objective
    (Springer, 2018-07-31) Belghitar, Yacine; Clark, Ephraim; Kassimatis, Konstantino
    Because heterogenous and unknown shareholder utility functions make it difficult to define a corporate objective common to all shareholders based on utility, the traditional theory of the firm concentrates on wealth maximization as the main measure of performance. Using the concept of ranked marginal utility, we develop a multi-dimensional measure of firm performance (TPM) that reflects the preferences of all risk averse shareholders towards all aspects of risk. We verify empirically that this is, in fact, the case for the first four moments of a large sample of US stocks over the period 2002–2010. Then, using the manager/shareholder agency conflict as the analytical framework, we show that TPM is a reliable, multi-dimensional performance measure and that one dimensional performance measures, such as mean returns, volatility or Tobin’s Q can lead to erroneous inference. By including shareholder preferences towards risk in the measure of firm performance as the corporate objective, we bring together the corporate finance literature and the literature on portfolio investment theory and practice.
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    Political connections and corporate financial decision making
    (Springer, 2018-11-16) Belghitar, Yacine; Clark, Ephraim; Saeed, Abubakr
    This paper investigates whether and how political connections influence managerial financial decisions. Our study reveals that those firms that have a politician on its board of directors are highly leveraged, use more long-term debt, hold large excess cash and are associated with low quality financial reporting compared to their non-connected counterparts. These effects escalate with the strength of the connected politician and whether he or his party is in power. The winning party effect is observed to be stronger than victory by the politician himself. Overall, our paper provides strong evidence that political connection is a two-edged sword. It is indeed a valuable resource for connected firms, but it comes at a cost of higher agency problems.
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    Political connections and corporate performance: evidence from Pakistan
    (Wiley, 2019-03-24) Saeed, Abubakr; Belghitar, Yacine; Clark, Ephraim
    This study seeks to understand how political connections affect firm performance. Using a hand‐collected dataset of Pakistani firms from 2008–2014, our firm fixed effects and Heckman two‐stage regression results show that connected firms outperform those without political ties. Moreover, we show channels through which political benefits are realized in terms of greater access to debt, lower financing costs and lower tax rates. These benefits are found to be particularly large when firms are connected to politicians who held political positions most recently and firms connected through their owners. Finally, we do not find evidence for differences in political favours across regulated and unregulated industries