Author
James R. Booth
Bio: James R. Booth is an academic researcher from Arizona State University. The author has contributed to research in topics: Interest rate & Loan. The author has an hindex of 14, co-authored 21 publications receiving 3256 citations.
Papers
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TL;DR: In this paper, the authors developed a theory of the role of the underwriter in certifying that risky issue prices reflect potentially adverse inside information, based on the literature on the use of reputational capital to guarantee product quality.
970 citations
TL;DR: In this article, the authors develop an explanation for IPO underpricing in which the issuer's demand for ownership dispersion creates an incentive to underprice, and empirical results are consistent with initial under-pricing reflecting the level of ownership disersion.
582 citations
TL;DR: This paper investigated factors affecting the number of outside directorships held by CEOs and found that CEOs of firms with growth opportunities hold fewer directorships than those of firms consisting primarily of assets-in-place.
402 citations
TL;DR: In this article, the authors examine whether regulation can be used to substitute for internal monitoring mechanisms (percentage of outside directors, officer and director common stock ownership, and CEO/Chair duality) to control for agency conflicts in a firm.
Abstract: In this paper we examine whether regulation can be used to substitute for internal monitoring mechanisms (percentage of outside directors, officer and director common stock ownership, and CEO/Chair duality) to control for agency conflicts in a firm. We find that, in general, the percentage of outside directors is negatively related to insider stock ownership, but is not affected by CEO/Chair duality. CEO/Chair duality is, however, less likely when insider stock ownership increases. We find these internal monitoring mechanisms to be significantly less related with regulated firms (banks and utilities). We conclude that to the extent that regulations reduce the impact of managerial decisions on shareholder wealth, effective internal monitoring of managers becomes less important in controlling agency conflicts. 2002 Elsevier Science B.V. All rights reserved.
351 citations
TL;DR: This article examined whether monitoring-related contract costs are reflected in bank loan spreads and found evidence that cross-monitoring by senior and subordinate claimholders is associated with smaller spreads and also found that loan spreads reflect financial contract costs of controlling borrower behavior toward the assets being financed.
239 citations
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TL;DR: In this paper, the economics of small business finance in private equity and debt markets are examined. But the authors focus on the macroeconomic environment and do not consider the impact of the macro economic environment on small business.
Abstract: This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance, and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research.
2,778 citations
TL;DR: In this article, the authors examined the returns earned by subscribing to initial public offerings of equity (IPOs), and they showed that IPOs with more informed investor capital require higher returns, and that prestigious underwriters are associated with IPOs that have lower returns.
Abstract: This paper examined the returns earned by subscribing to initial public offerings of equity (IPOs). Rock (1986) suggests that IPO returns are required by uninformed investors as compensation for the risk of trading against superior information. We show that IPOs with more informed investor capital require higher returns. The marketing underwriter's reputation reveals the expected level of “informed” activity. Prestigious underwriters are associated with lower risk offerings. With less risk there is less incentive to acquire information and fewer informed investors. Consequently, prestigious underwriters are associated with IPOs that have lower returns.
2,682 citations
TL;DR: In this paper, the authors examined the role of relationship lending in small firm finance and found that borrowers with longer banking relationships pay lower interest rates and are less likely to pledge collateral.
Abstract: This article examines the role of relationship lending in small firm finance. It examines price and nonprice terms of bank lines of credit extended to small firms. The focus on bank lines of credit allows the examination of a type of loan contract in which the bank-borrower relationship is likely to be an important mechanism for solving the asymmetric information problems associated with financing small enterprises. The authors find that borrowers with longer banking relationships pay lower interest rates and are less likely to pledge collateral. These results are consistent with theoretical arguments that relationship lending generates valuable information about borrower quality. Copyright 1995 by University of Chicago Press.
2,528 citations
TL;DR: In this article, the authors examined whether the presence of venture capitalists, as investors in a firm going public, can certify that the offering price of the issue reflects all available and relevant inside information.
Abstract: This paper provides support for the certification role of venture capitalists in initial public offerings. Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a control sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, we document that venture capitalists retain a significant portion of their holdings in the firm after the IPO. THE ABILITY OF THIRD-PARTY specialists to certify the value of securities issued by relatively unknown firms in capital markets that are characterized by asymmetric information between corporate insiders and public investors has attracted much academic interest in recent years. Several authors, including James (1990), Blackwell, Marr, and Spivey (1990), and Barry, Muscarella, Peavy, and Vetsuypens (1991) have developed and tested models based at least in part on the formal certification hypothesis presented in Booth and Smith (1986). A related body of work, represented by DeAngelo (1981), Beatty and Ritter (1986), Titman and Trueman (1986), Johnson and Miller (1988), Carter (1990), Simon (1990), and Carter and Manaster (1990) has examined how investment bankers and auditors help resolve the asymmetric information inherent in the initial public offering (IPO) process. In this paper we examine whether the presence of venture capitalists, as investors in a firm going public, can certify that the offering price of the issue reflects all available and relevant inside information. We hypothesize that venture capitalists can perform this function; that it will be an economically
2,490 citations
TL;DR: In this paper, the authors examined the relation between firm value and board structure and found that complex firms, which have greater advising requirements than simple firms, have larger boards with more outside directors, and this relation is driven by the number of outside directors.
1,964 citations