Abstract/Details

Three essays on share price misvaluation


2012 2012

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Abstract (summary)

This doctoral dissertation examines the measurement and identification of share price misvaluation using two prominent models. It also examines the role of equity misvaluation in the context of a number of corporate events. The first essay examines abnormal returns surrounding the announcement of stock splits and how this return is related to equity misvaluation and/or growth options of the firm. I find that overvalued firms have lower abnormal returns than undervalued firms and high-growth firms have higher abnormal returns than low-growth firms. Moreover, undervalued firms perform better than overvalued firms in the long run. I conclude that in the short run the market is able to distinguish, at least partially, between valid and false split signals and eventually corrects itself in subsequent years. My second essay examines the role of advertising and the method of payments in mergers or acquisitions. I find that stock-based acquirers have a higher advertising intensity in the pre-merger year when compared with cash-based acquirers and stock-based acquirers are more overvalued than cash-based acquirers prior to the merger. Moreover, managerial ownership in the acquiring firm is positively related to pre-merger advertising intensity where the method of payment is the acquirers' own equity. My third essay compares the Residual Income Model (RIM) by Ohlson [1995. Earnings, book values and dividends in equity valuation. Contemporary Accounting Research 11, 661–687] and the Rhodes-Kropf, Robinson, and Viswanathan model [2005.Valuation waves and merger activity: The empirical evidence. Journal of Financial Economics 77, 561–603]. These two models are used to detect misvaluation. Using publicly traded US firms I find that the Rhodes-Kropf et al. (2005) model is more consistent with theoretical predictions of misvaluation surrounding corporate events such as seasoned equity offerings (SEOs) and open market share repurchases.

Indexing (details)


Subject
Finance
Classification
0508: Finance
Identifier / keyword
Social sciences; Advertising; Mergers and acquisitions; Misvaluation; Residual income model; Rhodes-Kropf et al.; Share price
Title
Three essays on share price misvaluation
Author
Karim, Mohammad Aminul
Number of pages
123
Publication year
2012
Degree date
2012
School code
0459
Source
DAI-A 74/01(E), Dissertation Abstracts International
Place of publication
Ann Arbor
Country of publication
United States
ISBN
9781267592682
Advisor
Devos, Hendrik (Erik)
Committee member
Braun, Gary P.; Elliott, William B.; Xie, Feixue (Faith)
University/institution
The University of Texas at El Paso
Department
Economics
University location
United States -- Texas
Degree
Ph.D.
Source type
Dissertations & Theses
Language
English
Document type
Dissertation/Thesis
Dissertation/thesis number
3525728
ProQuest document ID
1039269906
Copyright
Database copyright ProQuest LLC; ProQuest does not claim copyright in the individual underlying works.
Document URL
http://search.proquest.com/docview/1039269906
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