Browsing by Author "Heron, Randall A."

Now showing 1 - 4 of 4
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    Capital market reactions to the passage of the Financial Services Modernization Act of 1999
    (The Quarterly Review of Economics and Finance, 2002) Carow, Kenneth A.; Heron, Randall A.
    The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act (GLBA), removed most of the remaining barriers between financial companies. Stock market reactions to the passage of GLBA vary across financial sectors and company size. Specifically, we find negative returns for foreign banks, thrifts and finance companies; insignificant returns for banks; and positive returns for investment banks and insurance companies. Additionally, larger non-depository firms have higher returns. The return variation reflects resolution of uncertainty surrounding the final provisions of GLBA, competitive pressures, and expectations of future business combinations. Potential gains from business combinations may arise from economies of scope, market power, and/or from an implicit extension of government guarantees to banking affiliates.
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    Do Stock Options Overcome Managerial Risk Aversion? Evidence from Exercises of Executive Stock Options
    (2016) Heron, Randall A.; Lie, Erik; Kelley School of Business
    We report that the probability that executives exercise options early decreases with the volatility of the underlying stock return. We interpret this to mean that executives’ subjective option value increases with volatility and that option grants increase executives’ risk appetite. Further decomposition reveals that the results are most pronounced for idiosyncratic volatility, consistent with our conjecture that executives believe they can better predict or influence the resolution of idiosyncratic uncertainty than systematic uncertainty and, thus, favor the former.
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    The Effect of Poison Pill Adoptions and Court Rulings on Firm Entrenchment
    (Elsevier, 2015-12) Heron, Randall A.; Lie, Erik; Kelley School of Business
    We challenge a common presumption that poison pills and two Delaware case rulings in 1995 validating such pills materially entrench firms. Based on unsolicited takeover attempts from 1985 to 2009, we find that poison pills enhance takeover premiums, but do not reduce completion rates. Furthermore, the 1995 Delaware rulings affected neither the use of poison pills among the targets, the effectiveness of the pills that were used, the completion rate of the takeover attempts, nor the takeover premiums.
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    On the relation between corporate social responsibility and financial performance
    (Wiley, 2020) Awaysheh, Amrou; Heron, Randall A.; Perry, Tod; Wilson, Jared I.; Kelley School of Business
    Research Summary This study reexamines the relation between corporate social responsibility (CSR) and financial performance by benchmarking firms against industry peers in a given year to identify best-in-class and worst-in-class firms. We also address distributional issues when using CSR ratings (clustering of CSR scores around the median and material differences across industries and time) and financial performance ratios (the possible influence of extreme values). We find that the best-in-class firms outperform their industry peers in terms of operating performance and have higher relative market valuations (Tobin's Q). When we control for endogeneity, we find that the significant relation between operating performance and CSR categories disappears, calling into question whether this relation is causal. However, we continue to find that best-in-class firms receive higher relative market valuations than industry peers. Managerial Summary The conflicting evidence on the relation between CSR and firm performance may influence a manager's decision to invest in CSR activities and an investor's decision to invest in a firm. Our research provides managers and investors with important implications regarding the value of relative benchmarking. Managers should understand that expectations of CSR performance evolve over time and that investors place higher valuations on the best-in-class CSR firms within an industry.