https://faculty.fuqua.duke.edu/~jgraham/website/SurveyPaper.PDF

The theory and practice of corporate finance: Evidence from the field

https://www.nber.org/system/files/working_papers/w9657/w9657.pdf

Payout Policy in the 21st Century

https://www8.gsb.columbia.edu/sites/valueinvesting/files/files/12Ikenberry_lak.pdf

Market underreaction to open market share repurchases

We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on net present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. Older executives without an MBA are more likely to rely on payback than are younger executives with an MBA. Surprisingly, most companies use a single company-wide discount rate to evaluate a project in a new industry and country. In addition to market risk, firms also frequently adjust cash flows or discount rates for interest rate risk, exchange rate risk, business cycle risk, and inflation risk. Few firms adjust discount rates or cash flows for book-to-market, distress, or momentum risks. A majority of large firms have a tight or somewhat tight target debt ratio, in contrast to only one-third of small firms. Executives rely heavily on informal rules when choosing capital structure. The most important factors affecting debt policy are maintaining financial flexibility and having a good credit rating. When issuing equity, respondents are concerned about earnings per share dilution and recent stock price appreciation. We find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes. If CFOs behave according to these deeper hypotheses, they apparently do so unknowingly.

The Theory and Practice of Corporate Finance: Evidence from the Field

Investor Psychology and Security Market Under- and Overreactions

This study extends the literature on the information content of stock message boards. To better understand the effect of online postings on trading activities and reduce the error due to stocks with small message board followings, we examine stocks with no fundamental news and high message posting activity. Such stocks tend to be of small firms with weak financials. For those stocks, we find a two-day pump followed by a two-day dump manipulation pattern among online traders, which suggests that an online stock message board can be used as a herding device to temporarily drive up stock prices. We also find that online traders’ credit-weighted sentiment index, but not the number of postings, is positively associated with contemporaneous return and negatively predicts the return next day and two days later. Also, absolute sentiment is negatively related with contemporaneous and next day's intraday volatility and positively related with the proportion of volume in small-sized trades. We conclude that message board sentiment is an important predictor of trading-related activities.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1468-5957.2011.02258.x

Do internet stock message boards influence trading? Evidence from heavily discussed stocks with no fundamental news

N Once of interest only in times of relatively low market prices, share repurchases have become significant even during periods of rising markets. A Wall Street Journal article (September 18, 1987, p. 15) reported that $25 billion of buybacks had been announced in the first seven months of 1987, compared to $21 billion in the same period of 1986 and $120 billion since January 1985. Announcements of repurchases skyrocketed with the October 1987 market crash, estimated at $44 billion in the 10 days after the crash (Wall Street Journal, January 27, 1988, p. 21). The motivations behind repurchases remain unclear. Most studies are confined to indirect evidence ob-

Managements' View on Share Repurchase and Tender Offer Premiums

Purpose – The purpose of this paper is to examine stocks that are most actively discussed by online posters and see if the messages posted about these stocks have information or if they are just noise.Design/methodology/approach – This study uses messages posted on TheLion.com, which reports a real time list of the ten most actively discussed stocks. The stocks in this list at the daily market close during 2005‐2006 are examined. An event study is performed to estimate the daily abnormal returns on these stocks. Contemporaneous and lead–lag regressions of abnormal returns against message posting activities are performed.Findings – Online posters prefer thinly traded micro‐cap stocks. On average, there is an abnormal return of 19.4 per cent on a stock the day it is one of the ten most talked about stocks. The number of messages posted about a stock on a given day is not only positively related with the stock's abnormal return on that day but it also positively predicts the next day's abnormal return.Resear...

Salil K. Sarkar

Papers

Do internet stock message boards influence trading? Evidence from heavily discussed stocks with no fundamental news

Managements' View on Share Repurchase and Tender Offer Premiums

Online talk: does it matter?

A two-parameter analysis of S-N fatigue life using Δσ and σmax

European foreign exchange market efficiency: Evidence based on crisis and noncrisis periods