News

Larocque Publishes paper on Cost of Equity Capital Estimates

Author: Lorie Marsh

Stephannie Larocque's Paper, "Manager's Cost of Equity Capital Estimates: Empirical Evidence," will be published in the Journal of Accounting, Auditing and Finance. Larocque co-authored the paper with Alastair Lawrence, UC Berkeley, and Kevin Veenstra, McMaster University.

 Abstract:      

Using actual practice data from U.S. corporate treasury executives, we provide initial evidence of managers’ internal estimates of their firms’ cost of equity capital (COEC) and extrapolate managers’ estimation practices to the broader population of public firms. Our study provides insights into the assumptions managers use in applying the capital asset pricing model (CAPM), the model that managers generally use to estimate their firms’ COEC according to prior research. We show that COEC estimates based on managers’ surveyed estimation practices are positively correlated with realized returns only in the pre-survey period, suggesting that managers set their COEC estimates in a backward-looking manner. Moreover, managers’ estimates are most correlated with estimates reverse-engineered following Easton (2004) and Gode and Mohanram (2003).…

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Why Bank Earnings Report Might Be Old News

Author: Lorie Marsh

Many publicly traded banks wrapped up their second-quarter earnings reports before the end of July. Some banks didn’t, but for that group, investors actually might have had an early window into their performance: The banks’ quarterly regulatory filings, known as “call reports,” were likely already available, according to a new study by researchers at the University of Notre Dame.

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Want An Early Peek At Bank Profits? Get It From U.S. Government

Author: Lorie Marsh

There’s a hidden way to get detailed financial data on publicly traded U.S. banks days before the companies release their earnings. The information is accurate, free, and -- most important -- totally legal.

The source is the federal government, which publishes snapshots of banks’ financial pictures, known as call reports, on a hard-to-find website

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New Study Shows That Call Reports Matter to US Markets

Author: Lorie Marsh

Independent research by the University of Notre Dame shows that bank call reports have a material effect on U.S. equity markets. Conclusions also state that the effect increases as asset size decreases, indicating that small and medium-sized banks are quietly releasing a flood of mandatory but market-moving information to the public with little to no fanfare.…

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