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This article examines the use of foreign currency derivatives (FCDs) in a sample of 720 large U.S. nonfinancial firms between 1990 and 1995 and its potential impact on firm value. Using Tobin's Q as a proxy for firm value, we find a positive relation between firm value and the use of FCDs. The hedging premium is statistically and economically significant(More)
We study the daily and intradaily cross-sectional relation between stock returns and the trading of institutional and individual investors in Nasdaq 100 securities. Based on the previous day's stock return, the top performing decile of securities is 23.9% more likely to be bought in net by institutions (and sold by individuals) than those in the bottom(More)
Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock returns and to issue equity when the market is overvalued. In this(More)
This paper provides a rational explanation for the apparent ability of managers to successfully time the maturity of their debt issues. We show that a structural break in excess bond returns during the early 1980s generates a spurious correlation between the fraction of long-term debt in total debt issues and future excess bond returns. Contrary to Baker,(More)
This study investigates the relationship between bank lending to small businesses, banking company size and complexity, and bank consolidation. We consider two potential in¯uences on small business lending associated with changes in the size distribution of the banking sector. On the one hand, organizational diseconomies may increase the costs of small(More)
Small banks are a major source of credit for small businesses. As banking consolidation continues , will a resulting decline in the presence of small banks adversely affect the availability of that credit? In May 1995, Texas became the first state to opt out of the interstate branching provision of the Riegle-Neal Interstate Banking and Branching Act of(More)
We provide evidence that the positive relation between firm-level stock returns and firm-level return volatility is due to firms' real options. Consistent with real option theory, we find that the positive volatility-return relation is much stronger for firms with more real options and that the sensitivity of firm value to changes in volatility declines(More)
We show that stock market liquidity is an important determinant of the cost of raising external capital. Using a large sample of seasoned equity offerings, we find that, ceteris paribus, investment banks' fees are significantly lower for firms with more liquid stock. We estimate that the difference in the investment banking fee for firms in the most liquid(More)