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Elaine Hutson

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Northwestern University (Kellogg)

Sirimon Treepongkaruna

Dartmouth College

Giovanni Barone-Adesi

University of Lugano

East Carolina University

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Papers by Elaine Hutson

Takeover targets and the probability of bid success: Evidence from the Australian market

The excess returns earned by takeover targets raises questions of efficiency in the market for co... more The excess returns earned by takeover targets raises questions of efficiency in the market for corporate control. Brown and Raymond and Samuelson and Rosenthal explain the target share pricing process as a function of the probability of success of the takeover bid. We highlight weaknesses in this work, propose an alternative model, and apply it to 245 Australian takeovers from 1980 to 1993. We find, for targets of successful bids, considerable non-convergence to the bid price. This is consistent with speculative trading models whereby the reduction in dispersion of traders' beliefs leads to the evaporation of market liquidity.

Australia's takeover rules : how good are they?

Our iron takeover law

Funds of hedge funds : not the poor cousins of the hedge fund industry

Response to comments on the Kearney and Hutson (2005) estimate of Dublin Airport Authority's cost of capital

Regulation of corporate control in Australia : a historical perspective

As the process of financial and economic reform gains pace throughout the Asia-Pacific region, on... more As the process of financial and economic reform gains pace throughout the Asia-Pacific region, one important aspect that deserves the attention of business and legal analysts is the regulation of corporate control. The purpose of this paper is to describe and assess the evolution of corporate control regulation in Australia. With some important changes to takeover law about to be passed by parliament, it is appropriate and timely to reflect on the process of regulatory change that has given us our current system, so that lawmakers may avoid the errors and pitfalls of the past. This assessment of the process of regulatory change in Australia may also provide lessons for regulators in the Asia-Pacific region.[extract]

Understanding the Start-up Funding Process in Venture Capital-backed and Non-venture Capital-backed Firms

Entrepreneurship, Growth and Economic Development, 2011

Takeover targets and the probability of bid success

International Review of Financial Analysis, 2000

The excess returns earned by takeover targets raises questions of efficiency in the market for co... more The excess returns earned by takeover targets raises questions of efficiency in the market for corporate control. Brown and Raymond and Samuelson and Rosenthal explain the target share pricing process as a function of the probability of success of the takeover bid. We highlight weaknesses in this work, propose an alternative model, and apply it to 245 Australian takeovers from 1980 to 1993. We find, for targets of successful bids, considerable non-convergence to the bid price. This is consistent with speculative trading models whereby the reduction in dispersion of traders' beliefs leads to the evaporation of market liquidity.

The early managed fund industry: Investment trusts in 19th century Britain

International Review of Financial Analysis, 2005

The early years of the 21 st century have been a difficult and challenging time for the managed f... more The early years of the 21 st century have been a difficult and challenging time for the managed funds industry. The neglected history of managed funds reveals prior episodes of sustained growth, questionable practices, upheaval and inevitably, regulation. The first fully diversified managed fund appeared in Britain in 1868, and the industry remained largely a British preserve until the rise of the investment company and the mutual fund in the United States during the 1920s. This paper documents the features of the early trusts, discusses the rise of the industry and the challenges it survived in the early years, and draws parallels with facets of the finance industry of today. JEL classifications: G23, N23

The Market for Corporate Control in Australia

Economic Papers: A journal of applied economics and policy, 1997

Page 1. THE MARKET FOR CORPORATE CONTROL IN AUSTRALIA by ELAINE HUTSON* ... However, in a re-exam... more

Takeover Bids, Share Prices, and the Expected Value Hypothesis

This paper examines the relationship between the price bid for a takeover target, the probability... more This paper examines the relationship between the price bid for a takeover target, the probability of the bid suceeding and the target's price over the course of the bid. We test and reject Samuelson and Rosenthal's (1986) expected value hypothesis. We find that over the bid, the price of the target of a successful bid typically rises towards the bid price, but is not observed to converge with the bid price. The lack of observed convergence appears to be due to an early cessation of trading in many of the bids that succeed. In the case of bids that fail, the target's share price is typically observed to rise above the bid price early in the bid. We consider several explanations for this, and suggest that the expectation of a subsequent bid is the most plausible explanation. This is supported by our empirical evidence. We also find that in the cases where the bid fails, early cessation of trading did not occur in the majority of cases.

The Irish Aviation Authority's Cost of Capital

Do private equity buyouts represent value for target shareholders? Premiums in the boom of the early 2000s

by Darragh Mahony and Elaine Hutson

This study compares the takeover premiums for 55 private equity buyouts with 59 takeovers involvi... more This study compares the takeover premiums for 55 private equity buyouts with 59 takeovers involving a public acquirer, from the US takeover market between 2004 and 2007. This investigation takes place amidst accusations of anti-competitive behavior against some of the most active private equity groups in the US. While controlling for several other factors that might affect the takeover premium,

Competiveness Implications for Ireland of EU Enlargement

Ten states, primarily from Central and Eastern Europe, acceded to the EU in May 2004. Another 2, ... more Ten states, primarily from Central and Eastern Europe, acceded to the EU in May 2004. Another 2, and possibly 3 CEE states are likely to join in 2007. We assesses the competitiveness implications of this phase of EU expansion for Ireland. Four specific topics are considered: the opportunities for trade and investment expansion, the implications for Ireland’s ability to attract

Chapter 11 The High-Technology Pecking Order in Spinoffs and Non-SpinoffsTeresa Hogan and Elaine HutsonThe High-Technology Pecking Order in Spinoffs and Non-Spinoffs in the Irish Software Sector

New Technology-Based Firms in the New Millenium, 2000

ABSTRACT This article has no abstract

The Impact of Corporate Governance Mandates on Firm-level Foreign Exchange Exposure

SSRN Electronic Journal, 2000

ABSTRACT Using a data set of 762 US non-financial firms, we explore the impact of the Sarbanes-Ox... more ABSTRACT Using a data set of 762 US non-financial firms, we explore the impact of the Sarbanes-Oxley (SOX) corporate governance mandates on firm-level foreign exchange exposure. We find that in the period immediately before the SOX mandates came into force, firms with strong corporate governance exhibited significantly lower levels of foreign exchange exposure than firms with weak corporate governance. This difference disappeared post-SOX. In addition, we find that equity-based compensation is inversely related to foreign exchange exposure, suggesting that CEOs can be incentivised to act in shareholders’ interests to manage risks. We also find some evidence that equity-based compensation in multinational firms is associated with significantly higher levels of foreign exchange exposure in firms with high managerial entrenchment – suggesting that incentive-based remuneration such as stock options can increase the propensity for managers to take risks in order to enhance the value of their equity holdings.

Firm-level internationalisation, regionalism and globalization

Houndmills Basingstoke U K Palgrave Macmillan 2011, 2011

ABSTRACT Covering the key issues in regionalism and globalization, this volume provides an in-dep... more ABSTRACT Covering the key issues in regionalism and globalization, this volume provides an in-depth review of topics such as outward FDI, internationalization and performance, human resources, knowledge and networks, corporate governance and international joint ventures. Through their selection of material, the editors present an overview of the most up-to-date research and aim to stimulate ideas and promote further research into this dynamic and exciting area.

The IMF and the new international financial architecture

Beyond the Asian Crisis, 2001

Asymmetry in REIT returns

This study examines asymmetries in real estate investment trust (REIT) returns using a variety of... more This study examines asymmetries in real estate investment trust (REIT) returns using a variety of metrics, and compares them to several stock indexes and the U.S. long-term government bond index. The findings reveal that skewness is inversely related to the index's relative performance; the equity indexes exhibit negative skewness during the boom period of the late 1990s and become positively skewed after the technology stock crash in 2000, while for the REIT index, superior post-crash performance is accompanied by increasingly negative skewness. The results with respect to individual REITs are in contrast to many previous studies in that in the majority of cases the individual REITs display the same sign of skewness as the index data.

The Irish Aviation Authority's cost of capital : report to the Commission for Aviation Regulation

The weighted average cost of capital (WACC) approach is used to estimate the IAA's cost of ca... more The weighted average cost of capital (WACC) approach is used to estimate the IAA's cost of capital. To implement this approach, it is necessary to estimate the IAA's cost of equity, its cost of debt and its gearing ratio. Following a brief financial summary, the cost of equity is discussed in Section 3, the cost of debt is discussed in Section 4, the IAA's gearing is discussed in Section 5, and Section 6 brings these together in the WACC calculations to derive the estimate of the IAA's cost of capital.

Takeover targets and the probability of bid success: Evidence from the Australian market

The excess returns earned by takeover targets raises questions of efficiency in the market for co... more The excess returns earned by takeover targets raises questions of efficiency in the market for corporate control. Brown and Raymond and Samuelson and Rosenthal explain the target share pricing process as a function of the probability of success of the takeover bid. We highlight weaknesses in this work, propose an alternative model, and apply it to 245 Australian takeovers from 1980 to 1993. We find, for targets of successful bids, considerable non-convergence to the bid price. This is consistent with speculative trading models whereby the reduction in dispersion of traders' beliefs leads to the evaporation of market liquidity.

Australia's takeover rules : how good are they?

Our iron takeover law

Funds of hedge funds : not the poor cousins of the hedge fund industry

Response to comments on the Kearney and Hutson (2005) estimate of Dublin Airport Authority's cost of capital

Regulation of corporate control in Australia : a historical perspective

As the process of financial and economic reform gains pace throughout the Asia-Pacific region, on... more As the process of financial and economic reform gains pace throughout the Asia-Pacific region, one important aspect that deserves the attention of business and legal analysts is the regulation of corporate control. The purpose of this paper is to describe and assess the evolution of corporate control regulation in Australia. With some important changes to takeover law about to be passed by parliament, it is appropriate and timely to reflect on the process of regulatory change that has given us our current system, so that lawmakers may avoid the errors and pitfalls of the past. This assessment of the process of regulatory change in Australia may also provide lessons for regulators in the Asia-Pacific region.[extract]

Understanding the Start-up Funding Process in Venture Capital-backed and Non-venture Capital-backed Firms

Entrepreneurship, Growth and Economic Development, 2011

Takeover targets and the probability of bid success

International Review of Financial Analysis, 2000

The excess returns earned by takeover targets raises questions of efficiency in the market for co... more The excess returns earned by takeover targets raises questions of efficiency in the market for corporate control. Brown and Raymond and Samuelson and Rosenthal explain the target share pricing process as a function of the probability of success of the takeover bid. We highlight weaknesses in this work, propose an alternative model, and apply it to 245 Australian takeovers from 1980 to 1993. We find, for targets of successful bids, considerable non-convergence to the bid price. This is consistent with speculative trading models whereby the reduction in dispersion of traders' beliefs leads to the evaporation of market liquidity.

The early managed fund industry: Investment trusts in 19th century Britain

International Review of Financial Analysis, 2005

The early years of the 21 st century have been a difficult and challenging time for the managed f... more The early years of the 21 st century have been a difficult and challenging time for the managed funds industry. The neglected history of managed funds reveals prior episodes of sustained growth, questionable practices, upheaval and inevitably, regulation. The first fully diversified managed fund appeared in Britain in 1868, and the industry remained largely a British preserve until the rise of the investment company and the mutual fund in the United States during the 1920s. This paper documents the features of the early trusts, discusses the rise of the industry and the challenges it survived in the early years, and draws parallels with facets of the finance industry of today. JEL classifications: G23, N23

The Market for Corporate Control in Australia

Economic Papers: A journal of applied economics and policy, 1997

Page 1. THE MARKET FOR CORPORATE CONTROL IN AUSTRALIA by ELAINE HUTSON* ... However, in a re-exam... more

Takeover Bids, Share Prices, and the Expected Value Hypothesis

This paper examines the relationship between the price bid for a takeover target, the probability... more This paper examines the relationship between the price bid for a takeover target, the probability of the bid suceeding and the target's price over the course of the bid. We test and reject Samuelson and Rosenthal's (1986) expected value hypothesis. We find that over the bid, the price of the target of a successful bid typically rises towards the bid price, but is not observed to converge with the bid price. The lack of observed convergence appears to be due to an early cessation of trading in many of the bids that succeed. In the case of bids that fail, the target's share price is typically observed to rise above the bid price early in the bid. We consider several explanations for this, and suggest that the expectation of a subsequent bid is the most plausible explanation. This is supported by our empirical evidence. We also find that in the cases where the bid fails, early cessation of trading did not occur in the majority of cases.

The Irish Aviation Authority's Cost of Capital

Do private equity buyouts represent value for target shareholders? Premiums in the boom of the early 2000s

by Darragh Mahony and Elaine Hutson

This study compares the takeover premiums for 55 private equity buyouts with 59 takeovers involvi... more This study compares the takeover premiums for 55 private equity buyouts with 59 takeovers involving a public acquirer, from the US takeover market between 2004 and 2007. This investigation takes place amidst accusations of anti-competitive behavior against some of the most active private equity groups in the US. While controlling for several other factors that might affect the takeover premium,

Competiveness Implications for Ireland of EU Enlargement

Ten states, primarily from Central and Eastern Europe, acceded to the EU in May 2004. Another 2, ... more Ten states, primarily from Central and Eastern Europe, acceded to the EU in May 2004. Another 2, and possibly 3 CEE states are likely to join in 2007. We assesses the competitiveness implications of this phase of EU expansion for Ireland. Four specific topics are considered: the opportunities for trade and investment expansion, the implications for Ireland’s ability to attract

Chapter 11 The High-Technology Pecking Order in Spinoffs and Non-SpinoffsTeresa Hogan and Elaine HutsonThe High-Technology Pecking Order in Spinoffs and Non-Spinoffs in the Irish Software Sector

New Technology-Based Firms in the New Millenium, 2000

ABSTRACT This article has no abstract

The Impact of Corporate Governance Mandates on Firm-level Foreign Exchange Exposure

SSRN Electronic Journal, 2000

ABSTRACT Using a data set of 762 US non-financial firms, we explore the impact of the Sarbanes-Ox... more ABSTRACT Using a data set of 762 US non-financial firms, we explore the impact of the Sarbanes-Oxley (SOX) corporate governance mandates on firm-level foreign exchange exposure. We find that in the period immediately before the SOX mandates came into force, firms with strong corporate governance exhibited significantly lower levels of foreign exchange exposure than firms with weak corporate governance. This difference disappeared post-SOX. In addition, we find that equity-based compensation is inversely related to foreign exchange exposure, suggesting that CEOs can be incentivised to act in shareholders’ interests to manage risks. We also find some evidence that equity-based compensation in multinational firms is associated with significantly higher levels of foreign exchange exposure in firms with high managerial entrenchment – suggesting that incentive-based remuneration such as stock options can increase the propensity for managers to take risks in order to enhance the value of their equity holdings.

Firm-level internationalisation, regionalism and globalization

Houndmills Basingstoke U K Palgrave Macmillan 2011, 2011

ABSTRACT Covering the key issues in regionalism and globalization, this volume provides an in-dep... more ABSTRACT Covering the key issues in regionalism and globalization, this volume provides an in-depth review of topics such as outward FDI, internationalization and performance, human resources, knowledge and networks, corporate governance and international joint ventures. Through their selection of material, the editors present an overview of the most up-to-date research and aim to stimulate ideas and promote further research into this dynamic and exciting area.

The IMF and the new international financial architecture

Beyond the Asian Crisis, 2001

Asymmetry in REIT returns

This study examines asymmetries in real estate investment trust (REIT) returns using a variety of... more This study examines asymmetries in real estate investment trust (REIT) returns using a variety of metrics, and compares them to several stock indexes and the U.S. long-term government bond index. The findings reveal that skewness is inversely related to the index's relative performance; the equity indexes exhibit negative skewness during the boom period of the late 1990s and become positively skewed after the technology stock crash in 2000, while for the REIT index, superior post-crash performance is accompanied by increasingly negative skewness. The results with respect to individual REITs are in contrast to many previous studies in that in the majority of cases the individual REITs display the same sign of skewness as the index data.

The Irish Aviation Authority's cost of capital : report to the Commission for Aviation Regulation

The weighted average cost of capital (WACC) approach is used to estimate the IAA's cost of ca... more The weighted average cost of capital (WACC) approach is used to estimate the IAA's cost of capital. To implement this approach, it is necessary to estimate the IAA's cost of equity, its cost of debt and its gearing ratio. Following a brief financial summary, the cost of equity is discussed in Section 3, the cost of debt is discussed in Section 4, the IAA's gearing is discussed in Section 5, and Section 6 brings these together in the WACC calculations to derive the estimate of the IAA's cost of capital.