John J. McConnell’s research while affiliated with Indiana University – Purdue University Indianapolis and other places

Contracts to service single-family residential mortgage loans for institutional investors represent the primary asset and the primary source of revenues for most mortgage banking companies (MBC's). MBC's acquire servicing contracts either by originating and selling loans to an institutional investor and thereafter servicing them for the investor, or by purchasing the right to service loans from other mortgage originators. 1

OVER THE SPAN of the last several years, there has been substantial interest evidenced in the finance literature in asset leasing as a corporate decision problem. Indeed, given the sheer volume of published papers on the topic,' the casual reader might be tempted to conclude that leasing is at least one of the two or three most inportant issues in the theory of the firm. Some portion of this activity would appear to be attributable to a widespread feeling that certain outrages were perpetrated in an early paper in the area [8]. A more neutral view, however, suggests that the intriguing characteristic of the leasing problem is the fact that it forces one to confront along* the way most of the difficult and subtie issues of asset-and-liability valuation under uncertainty which have veen the general concern of the finance theorist in recent times. For this reason, it holds particular fascination as an analytical challenge. We hope in the present paper to shed additional light on the relevant issues by approaching the analysis from a somewhat different perspective than has thus far been attempted. Our debt to various writers, notably Gordon [5] and Schall [21], will be evident in that undertaking.

We examine announcement period excess returns to acquirers of listed and unlisted targets in 17 Western European countries over the interval 1996 through 2001. Acquirers of listed targets earn an insignificant average excess return of –0.38%, while acquirers of unlisted targets earn a significant average excess return of +1.48%. This “listing effect” in acquirers’ returns persists through time and across countries and remains after controlling for method of payment for the target, the acquirer’s size and Tobin’s Q, the “liquidity” of the target, whether the acquisition created a blockholder in the acquirer’s ownership structure, whether the acquisition was a crossborder deal, and other variables. The fundamental factors that give rise to the listing effect, which has also been documented in U.S. acquisitions, remain elusive.

SUBJECT AREAS: Corporate restructuring; LBOs; valuation. CASE SETTING: 1985, LBO in Convenience Store Industry. Management of White Hen Pantry, a subsidiary of Jewel Stores, undertook a leveraged buyout of the subsidiary in 1985 with the assistance of PruCapital. The case focuses on the valuation of the subsidiary and the structure of the financing of the transaction.The case demonstrates how to construct cash flow forecasts, how investment bankers function, and how management of a subsidiary decided to undertake the LBO.The solution employs the Adjusted Present Value (APV) approach to analyzing WHP. We have used the case at the end of our first year core course, but the case can also be used in a course on corporate restructuring.

We investigate directly whether prior client performance matters in the decision by a corporate acquirer to retain a specific investment bank advisor for current takeover attempt. In contrast to inferences drawn from indirect studies, we find that the value created for clients in prior transactions is a significant determinant of retaining a specific investment bank for an acquirer's current takeover attempt. Changes in investment banks' market shares are positively correlated with the value created for clients in prior acquisition attempts. Finally, we find that the change in the market value of an investment bank at the time of the client's takeover attempt is positively related to the value created for the client during the attempt. These results imply that market forces align investment bankers' and clients' interests in the acquisition market.

Prior literature shows that the market rewards stocks with a 'consistent' record of meeting/beating the market's expectations (MBE). However, this valuation consequence distorts voluntary disclosure policy, which is used opportunistically in order to maintain consistency in MBE. This paper investigates whether managers' decisions on and analyst reaction to management forecasts are significantly related to consistency in MBE, after controlling for the historical tendency of earnings or expectations management. First, I find that firms with consistent MBE provide more frequent and pessimistic management forecasts than other firms. This implies that managers of firms having achieved consistent MBE are more likely to guide the market's expectations downward in order to avoid breaking their string of MBE. I also find that analysts discount the credibility of management forecasts of these firms in their revision process. This implies that analysts understand the opportunism behind the management forecasts of these firms. Finally, I find evidence that Regulation FD intensified the tendency of these firms to issue more frequent and pessimistic management forecasts. This implies that Regulation FD has reinforced the propensity of these firms to use management forecasts as a guidance mechanism. I would like to thank the members of my dissertation committee: Bill Kross (co-chair), Byung Ro (co-chair), and Susan Watts, for their guidance and encouragement.. I greatly acknowledge the contribution of Thomson Financial for providing management and analyst forecast data.