Firm decisions and market responses

Three accounting essays

I.Q.H. van Amelsfoort

Research output: ThesisDoctoral ThesisScientific

489 Downloads (Pure)

Abstract

Firms operate in a complex economic environment where they interact with a broad base of stakeholders. Stakeholders are interested in the economic environment of the firm and its prospects to determine the value of their claims. For this valuation a wide range of information sources is used which per definition provide a depiction of the firm and its economic environment. As the stakeholders are important to the firm, managers have incentives to try to affect their assessment of the firm, by making opportunistic disclosure decisions. In three essays, I examine topics revolving around this notion. In the first essay I show that reporting regulation requires firms to recognize their development activities as an asset on the balance sheet, even though the firm is likely to have incentives to avoid recognition. In addition, I show in this essay that it is not straightforward that required capitalization is beneficial for the valuation of firms by their equity investors. In the second essay I examine securitization transactions by U.S. banks, where they provide an explicit guarantee. Due to the specific reporting regulation, it is possible that the securitized loan portfolios no longer have to be recognized on the balance sheet. This particular securitization is beneficial for banks as the explicit guarantee reduces uncertainty for the buying party, making the transaction more appealing during times of economic uncertainty. My results indicate that even during the recent widespread financial crisis, where arguably liquidity markets dried up, these securitization transactions can still be used by banks to enhance their liquidity. In the third essay I examine the valuation by different stakeholders. In this essay I argue that the value of the respective claims can be interpreted as a summary statistic of all information used by the respective stakeholder. Then I show that the valuation processes by different stakeholders, namely shareholders and CDS contract holders, differs based on observable firm characteristics. My results indicate that this difference in the valuation processes can be exploited using the trading strategy developed in this essay.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • Bouwens, Jan, Promotor
  • Suijs, Jeroen, Promotor
Award date12 Sep 2012
Place of PublicationTilburg
Publisher
Print ISBNs9789056683207
Publication statusPublished - 2012

Fingerprint

Market response
Stakeholders
Economic environment
Securitization
Balance sheet
Incentives
Guarantee
Capitalization
Equity
Sources of information
Uncertainty
Disclosure
Statistics
Investors
Financial crisis
Managers
Firm characteristics
Trading strategies
Economic uncertainty
Liquidity

Cite this

van Amelsfoort, I. Q. H. (2012). Firm decisions and market responses: Three accounting essays. Tilburg: CentER, Center for Economic Research.
van Amelsfoort, I.Q.H.. / Firm decisions and market responses : Three accounting essays. Tilburg : CentER, Center for Economic Research, 2012. 78 p.
@phdthesis{e3b97b5a95bd4cce944d1d7f39e969f1,
title = "Firm decisions and market responses: Three accounting essays",
abstract = "Firms operate in a complex economic environment where they interact with a broad base of stakeholders. Stakeholders are interested in the economic environment of the firm and its prospects to determine the value of their claims. For this valuation a wide range of information sources is used which per definition provide a depiction of the firm and its economic environment. As the stakeholders are important to the firm, managers have incentives to try to affect their assessment of the firm, by making opportunistic disclosure decisions. In three essays, I examine topics revolving around this notion. In the first essay I show that reporting regulation requires firms to recognize their development activities as an asset on the balance sheet, even though the firm is likely to have incentives to avoid recognition. In addition, I show in this essay that it is not straightforward that required capitalization is beneficial for the valuation of firms by their equity investors. In the second essay I examine securitization transactions by U.S. banks, where they provide an explicit guarantee. Due to the specific reporting regulation, it is possible that the securitized loan portfolios no longer have to be recognized on the balance sheet. This particular securitization is beneficial for banks as the explicit guarantee reduces uncertainty for the buying party, making the transaction more appealing during times of economic uncertainty. My results indicate that even during the recent widespread financial crisis, where arguably liquidity markets dried up, these securitization transactions can still be used by banks to enhance their liquidity. In the third essay I examine the valuation by different stakeholders. In this essay I argue that the value of the respective claims can be interpreted as a summary statistic of all information used by the respective stakeholder. Then I show that the valuation processes by different stakeholders, namely shareholders and CDS contract holders, differs based on observable firm characteristics. My results indicate that this difference in the valuation processes can be exploited using the trading strategy developed in this essay.",
author = "{van Amelsfoort}, I.Q.H.",
year = "2012",
language = "English",
isbn = "9789056683207",
series = "CentER Dissertation Series",
publisher = "CentER, Center for Economic Research",
school = "Tilburg University",

}

van Amelsfoort, IQH 2012, 'Firm decisions and market responses: Three accounting essays', Doctor of Philosophy, Tilburg University, Tilburg.

Firm decisions and market responses : Three accounting essays. / van Amelsfoort, I.Q.H.

Tilburg : CentER, Center for Economic Research, 2012. 78 p.

Research output: ThesisDoctoral ThesisScientific

TY - THES

T1 - Firm decisions and market responses

T2 - Three accounting essays

AU - van Amelsfoort, I.Q.H.

PY - 2012

Y1 - 2012

N2 - Firms operate in a complex economic environment where they interact with a broad base of stakeholders. Stakeholders are interested in the economic environment of the firm and its prospects to determine the value of their claims. For this valuation a wide range of information sources is used which per definition provide a depiction of the firm and its economic environment. As the stakeholders are important to the firm, managers have incentives to try to affect their assessment of the firm, by making opportunistic disclosure decisions. In three essays, I examine topics revolving around this notion. In the first essay I show that reporting regulation requires firms to recognize their development activities as an asset on the balance sheet, even though the firm is likely to have incentives to avoid recognition. In addition, I show in this essay that it is not straightforward that required capitalization is beneficial for the valuation of firms by their equity investors. In the second essay I examine securitization transactions by U.S. banks, where they provide an explicit guarantee. Due to the specific reporting regulation, it is possible that the securitized loan portfolios no longer have to be recognized on the balance sheet. This particular securitization is beneficial for banks as the explicit guarantee reduces uncertainty for the buying party, making the transaction more appealing during times of economic uncertainty. My results indicate that even during the recent widespread financial crisis, where arguably liquidity markets dried up, these securitization transactions can still be used by banks to enhance their liquidity. In the third essay I examine the valuation by different stakeholders. In this essay I argue that the value of the respective claims can be interpreted as a summary statistic of all information used by the respective stakeholder. Then I show that the valuation processes by different stakeholders, namely shareholders and CDS contract holders, differs based on observable firm characteristics. My results indicate that this difference in the valuation processes can be exploited using the trading strategy developed in this essay.

AB - Firms operate in a complex economic environment where they interact with a broad base of stakeholders. Stakeholders are interested in the economic environment of the firm and its prospects to determine the value of their claims. For this valuation a wide range of information sources is used which per definition provide a depiction of the firm and its economic environment. As the stakeholders are important to the firm, managers have incentives to try to affect their assessment of the firm, by making opportunistic disclosure decisions. In three essays, I examine topics revolving around this notion. In the first essay I show that reporting regulation requires firms to recognize their development activities as an asset on the balance sheet, even though the firm is likely to have incentives to avoid recognition. In addition, I show in this essay that it is not straightforward that required capitalization is beneficial for the valuation of firms by their equity investors. In the second essay I examine securitization transactions by U.S. banks, where they provide an explicit guarantee. Due to the specific reporting regulation, it is possible that the securitized loan portfolios no longer have to be recognized on the balance sheet. This particular securitization is beneficial for banks as the explicit guarantee reduces uncertainty for the buying party, making the transaction more appealing during times of economic uncertainty. My results indicate that even during the recent widespread financial crisis, where arguably liquidity markets dried up, these securitization transactions can still be used by banks to enhance their liquidity. In the third essay I examine the valuation by different stakeholders. In this essay I argue that the value of the respective claims can be interpreted as a summary statistic of all information used by the respective stakeholder. Then I show that the valuation processes by different stakeholders, namely shareholders and CDS contract holders, differs based on observable firm characteristics. My results indicate that this difference in the valuation processes can be exploited using the trading strategy developed in this essay.

M3 - Doctoral Thesis

SN - 9789056683207

T3 - CentER Dissertation Series

PB - CentER, Center for Economic Research

CY - Tilburg

ER -

van Amelsfoort IQH. Firm decisions and market responses: Three accounting essays. Tilburg: CentER, Center for Economic Research, 2012. 78 p. (CentER Dissertation Series).