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- Misconduct in the banking industry : stock market reaction to settlement announcementsPublication . Carvalho, Francisco Pessoa de; Cerqueiro, Geraldo Manuel AlvesThis study investigates the impact of settlement announcements between international banks and regulators on the short-term stock market performance of the banks. Recurring to event study methodology, this analysis is focused in settlements larger than USD 100 million. The dataset is comprised of penalties imposed on 25 financial institutions indentified as Global Systemically Important Banks (G-SIBs), totaling 141 events from 2010 to February 2017. Results for the full sample show significant positive abnormal returns for different periods surrounding the event. Significant positive abnormal returns on the day before the announcement for non-USA banks suggest leakage of information before the information is made public. Regarding USA banks the market response, although positive, seems to be slightly delayed. The positive abnormal returns indicate that investors are pleased that litigation cases are concluded and that the terms of deals are better than expected. Partial tax deduction of financial penalties also contributes to the positive reaction. Analysis of the determinants of abnormal returns supports these arguments and reveals that investors penalize less efficient banks. Lastly, settlements involving payments with compensatory nature and violation of sanctions are particularly well received by the market and lead to larger abnormal returns.
- Google search volume as a proxy of investor attention : are previous findings robust?Publication . Pancada, João Tanissa de Carvalho; Faias, José Afonso de Carvalho TavaresI assess the robustness to different periods and panel models of several findings in the literature that uses Google search volume as an investor attention proxy. With all S&P 500 stocks between 2004 and 2016, I confirm that weekly search volume is persistent and increases are associated with high share turnover as well as earnings announcements. When the CCEMG estimator of Pesaran (2006) is used, I find evidence against Da et al. (2011) but consistent with Barber and Odean (2008). Even for large stocks, surges in people’s attention predict positive abnormal returns one week ahead, which reverse within one year. I conclude the literature should adopt panel estimators more robust to the presence of both firm and time effects.
- Proposed acquisition of Norwegian Air Shuttle by RyanairPublication . Pletenytska, Olha; Assunção, António Luís Traça Borges deThe European airline industry can be characterized by being a very competitive, in the consolidation phase, with many Asian and Middle East competitors entering into this market. Therefore, there exist several moves airline companies are expected to make in the next couple of years. It is expected some activity from full-service carriers as in a attempt to enter into low-cost business segment, or low-cost carriers to expand into longhaul flight segment due to pressures on costs and profitability, and others. In this context, the current dissertation focuses on the potential deal between Ryanair and Norwegian Air Shuttle. This deal puts forward the entrance of the largest low-cost carrier into the longhaul segment, and an opportunity to expand to other regions as US. Given the conditions of two airlines, the synergies of 1637 million euros were forecasted and thus, it is proposed to Ryanair to pay a premium of 23,36% over the current share price to Norwegian Air Shuttle shareholders. This translates into the price per share of NOK 300 and the total transaction value of NOK 10 727,9 million, all paid in cash.
- A hypothetical case study in the oil and gas energy sector : the acquisition of Laredo Petroleum, Inc. by Chevron CorporationPublication . Pavliuk, Bogdan; Assunção, António Luís Traça Borges deThe collapse in oil prices in the summer of 2014 marked a structural shift in the energy landscape and gave promise to intensified activity in terms of oil and gas consolidation. In light of this environment, the press was often referencing the cash-rich energy giant Chevron Corporation as likely to pursue lucrative acquisition opportunities. Similarly, the poorly diversified upstream company Laredo Petroleum, Inc. was perceived as a probable target for the larger players. In exploring the justifications for a potential Chevron-Laredo deal from the perspective of year-end 2014, the following findings have been obtained. Firstly, there exists sound strategic rationale: Laredo’s Permian Basin assets and core competencies seem like a good fit for Chevron’s operations. Secondly, the depressed oil price climate has opened a “window of opportunity” for Chevron to acquire Laredo “cheaply”: given a base-case oil price scenario of $60 per barrel, Laredo’s standalone value per share is estimated at $14,48, marking a 40% upside potential to the $10,35 market price. Thirdly, given its generous cash pile of $12,8 billion, Chevron has the means to finance the acquisition entirely with cash. Most importantly, however, minimal synergies are expected to be reaped due to the combined entity’s inability to significantly slash costs, with the per-share value estimated at only $0,71. Lastly, the vast uncertainty surrounding future oil prices poses difficulties in estimating a fair value and therefore in establishing an appropriate purchase price. With the risks outweighing the rewards, the final recommendation is for Chevron to not pursue the deal.