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2008 Seminars

21 February

Speaker:

Professor Stephen Penman

Title:

The Pricing of Earnings and Cash Flows and an Affirmation of Accrual Accounting

Abstract:

Under accrual accounting, earnings add to shareholders' equity. However (we show), under accrual accounting cash flow generated by a business has no effect on shareholders' equity, but reduces the book value of net assets employed in business operations. In short, accrual accounting rules prescribe that earnings add to shareholder value but cash flow is irrelevant to the valuation of equity. This paper documents that the stock market prices equity shares according to this prescription. Earnings are priced positively but, given earnings, a dollar more of free cash flow from a business - cash from operations minus cash investment is, on average, associated with approximately a dollar less in the market value of the business, and has no association with changes in the market value of the equity claim on the business. Further, controlling for the cash investment component of free cash flow, 'cash flow from operations' also reduces the market value of the business dollar-for-dollar, and is unrelated to the changes in market value of the equity.

About the Speaker:

Professor Penman's research focuses on financial statement analysis and the use of accounting information in equity valuation. Prior to his appointment at Columbia, he held the L. H. Penney Chair at the University of California, Berkeley. He has published numerous papers on accounting and equity valuation and has received the AICPA/American Accounting Association Award for notable contributions to the literature. He is author of Financial Statement Analysis and Security Valuation, published in 2001 by Irwin/McGraw-Hill, for which he received the Wildman Medal. Penman serves as co-director of the Center for Excellence in Accounting and Security Analysis at the Columbia Business School and also as managing editor of the Review of Accounting Studies.
3 April

Speaker:

Marc Kilgour, Wilfrid Laurier University

Title:

To Share or To Fight? A Strategic Analysis
18 April

Speaker:

Professor Terrance Odean, Haas School of Business, University of California at Berkeley.
2 May

Speaker:

Balasingham Balachandran, Monash University

Title:

Choice of Seasoned Equity offerings: Renounceability, Control dilution and Underwriting status - New Evidence
22 May

Speaker:

Dick van Dijk, Erasmus University

Title:

Getting the Most Out of Macroeconomic Information for Predicting Stock Returns and Volatility
13 June

Speaker:

Dr Katrina Ellis, Head of Research, APRA
TBA

Speaker:

Renee Adams, University of Queensland
25 July

Speaker:

Peter Pham

Title:

Strategic Order Submission and Cancellation in Pre-Opening Periods and its Impact on Price Discovery: The Case of IPO Firms
1 August

Speaker:

Graham Partington

Title:

What is Wrong with Capital Budgeting and Just About Everything Else
8 August

Speaker:

David Gallagher

Title:

The Value of Alpha Forecasts in Portfolio Construction
13 August

Speaker:

Elaine Hutson

Title:

Openness and Foreign Exchange Exposure: A Firm-level Multi-country Study
Abstract

We examine the relation between economic openness and foreign exchange exposure for a sample of3,788 firms from 23 developed countries. We find that the more open the economy, the more exposed are its firms to exchange rate movements, and this relation holds after controlling for country-level governance variables, and size, industry and several financial variables at the firm level. Consistent with prior studies, we find a significant inverse relation between exchange exposure and firm size. Wealso find a strong inverse relation between a firm's exchange exposure and the extent of credit or protection in the country in which the firm is based. This is consistent with managers acting to reduce the likelihood of financial distress in countries in which bankruptcy costs are high.
15 August

Speaker:

Petko Kalev

Title:

Towards a Flexible Price Limit System
22 August

Speaker:

Colm Kearney

Title:

Firm-level Internationalisation and the Home Bias Puzzle
29 August

Speaker:

David Johnstone

Title:

A Short Comparison of Mean-Variance and Expected Utility
5 September

Speaker:

Graham Bornholt

Title:

The Two Year Effect
12 September

Speaker:

Max Stevenson

Title:

Identifying and Predicting Financial Distress in Hedge Funds
19 September

Speaker:

Philip Gharghori

Title:

Default Risk Prediction: A New Non-linear Approach
26 September

Speaker:

James Cummings

Title:

Price Formation and Liquidity Surrounding Large Trades in Interest Rate and Equity Index Futures: Evidence from the Sydney Futures Exchange
10 October

Speaker:

Olan Henry

Title:

The Stock Market's Reaction to Monetary Policy
17 October

Speaker:

Alexander Ljungqvist

Title:

Informational Hold-up and Performance Persistence in Venture Capital (provisional title)
24 October

Speaker:

Peter Buchen

Title:

The Mother of All Binaries
31 October

Speaker:

Hui Zheng

Title:

The Short-term Market Impact of an Increase in Transaction Tax

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