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Saturday, July 25, 2020 | History

2 edition of effect of exchange offers and stock swaps on equity risk and shareholders" wealth found in the catalog.

effect of exchange offers and stock swaps on equity risk and shareholders" wealth

Won Heum Lee

effect of exchange offers and stock swaps on equity risk and shareholders" wealth

a signalling model approach : a dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Management

by Won Heum Lee

  • 62 Want to read
  • 39 Currently reading

Published by UMI Dissertation Services in Michigan .
Written in English

    Subjects:
  • Stocks.,
  • Stocks -- Prices.,
  • Swaps (Finance),
  • Capital.

  • Edition Notes

    Statementby Won Heum Lee.
    The Physical Object
    Paginationxiii,146p. ;
    Number of Pages146
    ID Numbers
    Open LibraryOL22272124M

    interrelated: Debt-reducing exchange offers are undertaken by financially weak firms in an effort to stave off further financial distress and, thereby, preserve value for shareholders. A successfully completed exchange offer significantly reduces the likelihood that a firm will enter Chapter File Size: KB. What is a Total Return Swap (TRS)? A Total Return Swap is a contract between two parties who exchange the return from a financial asset Financial Assets Financial assets refer to assets that arise from contractual agreements on future cash flows or from owning equity instruments of another entity. A key between them. In this agreement, one party makes payments based on a set rate while the.

      However, with an equity default swap, the reference asset is an equity, i.e., a firm’s stock where the protection seller offers a hedge to the protection buyer against a substantial fall in the price of the underlying stock. For example, the equity default swap might be entered into to provide the protection buyer with protection against a   Increasing both the CEO’s effective ownership and risk-taking incentives helps to mitigate the new agency problems between managers and shareholders. However, if we focus on the agency problem arising from the extinguishment of the shareholders’ strategic default option, those two contractual adjustments affect the manager differently.

    5) The actual ratio of exchange in a stock-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm. TRUE 1. Equity swaps make this easier. An emerging markets investment manager can call up First Derivatives bank and ask for an equity swap on the South Korean stock market (one of the hottest equity markets of early ). The equity swap is more convenient for the investment manager for several reasons.


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Effect of exchange offers and stock swaps on equity risk and shareholders" wealth by Won Heum Lee Download PDF EPUB FB2

A stock swap occurs when shareholders ' ownership of the target company's shares are exchanged for shares of the acquiring company. During a stock swap, each company's shares. The main distinction between cash and stock transactions is this: In cash transactions, acquiring shareholders take on the entire risk that the expected synergy value embedded in the acquisition.

macroeconomic effects of debt buybacks antd equity held by foreigners to a country's foreign debt equity-swaps. debt, the terms of the debt-equity exchange, the rate of profit or equity, the rate of profit remit-Hie examines the main results in the lighlt of.

1. In a merger or an acquisition, shares can be used as “currency” to buy the target company without having to pay cash. If Company A wants to acquire Company B using share swap deal, A gives B’s shareholders some of its own shares in exchange of each share of B they own.

B shares cease to exist after deal. : ET CONTRIBUTORS. Several researchers have found that the value of stock declines at the announcement of a debt for equity swap.

This decline is attributed to an information effect: the firm’s financial condition is worse than the market expected. Our research develops an alternative explanation. Using the theory that equity can be valued as an option on the firm, it is shown that, depending on the exchange Author: A.

Steven Graham. Shareholders wealth maximization criterion proposes that a business concern should only consider the decisions that maximize the market value of the share or the shareholders' wealth.

The answers are interrelated: Debt-reducing exchange offers are undertaken by financially weak firms in an effort to stave off further financial distress and, thereby, preserve value for shareholders.

equity swap as the short party so any downward movement in the share price is covered by the long party. First, a long party might also hedge with equity swaps.

A real example was the use of equity swaps by Sino-Environment Technology Group Ltd (“Sino-Env”) in Singapore in The company planned to issue convertible bonds. ToAuthor: Chao-hung Christopher Chen. An entirely different kind of financial transaction also goes by the name of "swap options." This strain of swap is a stock option.

But unlike traditional stock options, which require you to pay cash for shares, stock swap options allow you to exchange shares you already own for a larger number of new shares. How corporate actions impact stock price The impact on a stock’s price depends on the reasoning behind a particular action.

*As on 28 April Source: DVS Advisors 2. RIGHTS ISSUE In a rights issue, fresh shares are issued by a company to its existing shareholders.

But unlike bonus shares, they come at a price— usually a discounted price. Equity swaps are conventionally documented under the International Swaps & Derivatives Association (ISDA) Master Agreement and schedules to that agreement.

Under an equity swap, the `Equity Amount Payer' (as defined under ISDA documentation) will pay the economic return on the underlying security. This return is based on a reference price. Abstract.

We provide the first empirical study of the relationship between corporate working capital management and shareholders’ wealth.

Examining US corporations from throughwe find evidence that: the incremental dollar invested in net operating working capital is worth less than the incremental dollar held in cash for the average firm; the valuation of the incremental dollar Cited by: amount of risk encountered (Hakala and Wystup, ).

The three main types of exchange rate risk that we consider in this paper are (Shapiro, ; Madura, ): 1. Transaction risk, which is basically cash flow risk and deals with the effect of exchange rate moves on transactional account exposure related to receivables (export.

shareholders as equity returns in excess of risk free for a period of one year. Arditti () who finds a negative though insignificant relation between leverage and stock returns define leverage as the ratio of debt measured in book value to equity measured at market value.

Baker ()File Size: KB. Abandonment risk: Abeyance: Accelerated book-building: Accelerated depreciation: Accelerated share repurchase: Acceleration, Acceleration clause: Account balancing: Account receivable aging: Accountant letter: Accounting criteria of value creation: Accounting currency risk: Accounting procedures with an impact on earnings: Accounts payable.

In contrast, shareholders in the target firm typically observe a rise in share value during the same pre-merge period, mainly due to stock price arbitrage, which describes the action of trading Author: Andrew Bloomenthal.

Stock-for-Stock. Companies in stock-for-stock mergers agree to exchange shares based on a set ratio. For example, if companies X and Y agree to a 1-for-2 stock merger, Y shareholders will receive. A stock swap, also called a share exchange, share-for-share exchange, stock-for-stock, occurs during an company doing the takeover offers its own shares, at a predetermined rate, in exchange for the shares in the company it aims to : Christian Nordqvist.

A company may engage in debt for equity swaps with shareholders for a variety of reasons. The debt for equity swap allows a company to call back a portion of its stock by paying stockholders.

Often, the company will even offer increased financial incentive by paying the stockholders more than the stock is worth on the market.

An inaccurate valuation of the swap leads to a flawed accounting representation for ABC and may lull treasury staff into thinking that the hedge offers full protection against unexpected moves in.

Shareholders could do better by investing in risk-free government bonds yielding more than percent. The third major problem associated with the profit maximization objective is that it provides no direct way for financial managers to consider the risk associated with alternative decisions.Equity Index Swap.

An equity swap where one party periodically pays a fixed amount and receives an amount based on the performance of a basket of shares or a stock index. In other words, this swap involves the payment of periodic cash flows based on the change (positive or negative) in the value of an equity index in return for a fixed or a floating rate of interest applied to the notional.Equity securities, generally referred to as shares, comprise ordinary shares and preference shares.

Most of the equity securities listed on the Exchange are ordinary shares that account for most of the turnover of the Exchange. Ordinary shares and preferred shares are equity shares issued by the company to shareholders.