EDHEC Business School

About: EDHEC Business School is a education organization based out in Roubaix, France. It is known for research contribution in the topics: Portfolio & Capital asset pricing model. The organization has 294 authors who have published 1749 publications receiving 42687 citations. The organization is also known as: Ecole des Hautes Etudes Commerciales du Nord & EDHEC Business School.

Forecasting Corporate Bankruptcy Using Accrual-Based Models

Abstract: Financial information has been widely used to design bankruptcy prediction models. All research works that have studied such models assume that financial statements are reliable. However, reality is a bit different. Indeed, firms may tend to present their financial accounts depending on particular circumstances, especially when seeking to change the perception of the risk incurred by their partners, and thus distort or alter some of them. Consequently, one may wonder to what extent such “manipulations”, called earnings management, may influence any model that relies on accounting data. This is why we study how earnings management may affect financial variables and how it can indirectly distort predictions made by failure models. For this purpose, we used a measure that makes it possible to assess potential account manipulations, and not effective manipulations. Our results show that when these distortions are measured and used with other financial variables, models are more accurate than those that solely rely on pure financial data. They also show that the improvement of model accuracy is essentially due to a reduction of type-I error—the costliest error in economic terms.

Institutional Changes of Specified Purpose Acquisition Companies (SPACs)

Abstract: This study documents the changes in the corporate design of modern Specified Purpose Acquisition Companies (SPACs) for the years 2003 to 2012. Do institutional characteristics of SPACs determine the success of their merger outcomes? The paper finds that SPACs significantly redesigned their structure in the period under observation. In addition, the probability of a merger for SPACs increases if they are able to announce the deal soon after the Initial Public Offering (IPO), if the deal focuses on China and when their IPO is underwritten by EarlyBirdCapital.

Hedge Fund Transparency: Where Do We Stand?

Abstract: Unlike mutual funds, hedge funds are reluctant to provide detailed information on their investment portfolios. Since hedge funds may use niche investment strategies in narrow market segments, fund managers portend that thorough disclosure of their portfolio holdings—which are important to assessing future returns—would crowd out their trades, thus decreasing opportunities to generate outsized returns. However, incomplete disclosure can have some undesirable side effects. It might encourage hedge fund managers to take positions that are riskier than provided for by the manager’s mandate. Investors even risk fraudulent behavior, since the action of hedge fund management may be detected only when a fund has failed.This article presents the results of a comprehensive survey of hedge fund managers and investors on current hedge fund reporting practices. The authors find that the quality of hedge fund reporting is considered an important investment criterion. In analyzing the spectrum of opinions, the authors identify critical points of conflict between investors and managers.They find that investors are especially dissatisfied with the quality of information on liquidity and operational risk exposure. The survey also reveals that inappropriate performance measures are prevalent.

On Swiss Timing and Selectivity: In the Quest of Alpha

Abstract: This paper presents an overview of the theories underlying the major portfolio performance measurement models, with an empirical application to assess the market timing and stock-picking abilities of an exhaustive sample of 60 Swiss-equity investment funds over the 1977-1999 period. Regardless of the benchmark portfolio or the performance measurement model, we find no evidence that Swiss-equity mutual funds, either individually or as a whole, provide investors with superior stock selection or market timing relative to a passively managed benchmark portfolio. We also found a negative correlation between selectivity and timing results. Finally, the influence of asset size, funds age and management fees are considered as an explanation of the results.