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Dubois, Michel

Nom
Dubois, Michel
Affiliation principale
Site web
Fonction
Professeur.e ordinaire
Email
michel.dubois@unine.ch
Identifiants
https://libra.unine.ch/handle/123456789/231
_
0009-0001-9768-8221

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  • Publication
    Accès libre
    Three essays on financial analysts' performance
    (2016)
    Moraru-Arfire, Andreea 
    ;
    Dubois, Michel 
    This dissertation is composed of three chapters. The first chapter explores the importance of previously identified factors in explaining the variation in analysts’ earnings forecast error. As earnings forecasts are the main input in determining price targets and consequently stock recommendations, much of the process through which analysts process their input remains in a so-called “black box”. This study attempts to shed light on these inputs. First, it reveals that forecast errors are stable over time, and analysts do not efficiently integrate past information in their forecasts. Second, analysts do not factor in expectations related to the macroeconomic conditions for the underlying forecast horizon. Analysts overreact (underreact) to positive (negative) macroeconomic expectations on both GDP and consumer sentiment index. Third, this study decomposes analysts’ forecast errors variance by observable characteristics and fixed effects. Importantly, the analysis shows that there is an unobserved, time-invariant component related to the firm-analyst dimension that explains much of the variance in the forecast errors. This component is not yet captured by the existing observable characteristics which, at date, have a trifling effect on their own in explaining the variation in analysts’ forecast error.
    In the second chapter, I investigate the role of financial reporting frequency in analysts’ earnings forecasts. I addresses two questions. First, does mandatory quarterly reporting benefit financial analysts in decreasing their earnings forecast error and dispersion? Second, to what extent common accounting standards increase the convergence of analysts’ information set for firms with different reporting frequencies? I find little support to the claim that regulation forcing firms to issue more frequent financial information benefits financial analysts. Compared to a control sample of semiannual reporting firms in the European market, analysts issuing earnings forecasts for firms with mandatory quarterly frequency experience higher forecast error and dispersion. When firms are mandated to report not only on a quarterly frequency, but also under International Financial Reporting Standards (IFRS), analysts’ both forecast error and dispersion decrease. However, while IFRS does benefit analysts by increasing the quality of their information set in absolute terms, they do not wipe out the relative noise associated with mandatory quarterly statements.
    The third chapter focuses on how financial analysts adapt to the passage of regulations aiming at limiting conflicts of interest in the investment banking industry. This last chapter investigates analysts’ price targets and recommendations, and unravels a new form of conflicts of interest. Specifically, it investigates whether affiliated brokers issue unfavourable ratings on their clients’ competitors in the product market (rivals). The findings document an important gap between ratings for affiliated and rival firms. Specifically, brokers issue persistently higher ratings on firms with which they are affiliated compared to their rivals. Importantly, the Sarbanes-Oxley Act and the related financial regulations aiming at curbing the conflicts of interests had no significant impact in reducing this gap. As such, affiliated brokers continue to indirectly favour their clients. This form of conflict was devoid of adequate attention in prior research. Furthermore, investors are unaware of the existence of such conflict in the short-run.
  • Publication
    Accès libre
    Three essays on portfolio management
    (2015)
    Guidotti, Ivan 
    ;
    Dubois, Michel 
    This dissertation is constituted of three distinct chapters. The first two study the information role of sell-side analysts from two specific angles of attack. The first chapter focuses on the investment value of target prices. Based on a sample of more than 590’000 expected return revisions over the 1999-2011 period, I construct tercile portfolios that buy (sell) stocks with the highest (lowest) expected return revisions. The strategy initiated at the end of announcement day and held for a month that is long the highest tercile and short the lowest tercile yields a risk-adjusted performance of 0.48% per month. Similar results are obtained when the expected return revisions are industry or market adjusted. The risk-adjusted return remains significant if the position is initiated five days after the announcement (0.29% per month). Given the high number of target price revisions, I identify ex-ante likely valuable target prices. The risk-adjusted performance of the portfolio based on this subset increases to 0.81%. The downside exposures to SMB and MOM factors are negative and statistically significant at the 1% and 5% level, respectively. I demonstrate that more weight is given to pro cyclical (neutral) stocks when the expected probability of recession is low (high). Finally, we show that the results are not driven by firm specific events, post earnings announcement drift (PEAD), limited investors’ attention or illiquid stocks.
    In the second chapter I analyze the information conveyed by analysts’ research and how it is perceived by investors. I introduce a methodology that disentangles the information conveyed through analysts’ target prices according to its availability and scope. The purpose is to investigate if investors correctly interpret analysts’ research by analyzing whether there is correspondence between investors’ reaction and the type of information conveyed through analysts. The empirical results provide evidence that investors duly process analysts’ research and appropriately incorporate this information into prices. Indeed, public information is not associated with any abnormal return, whereas private information is. Moreover, the reaction to firm-specific private information is confined to the firm analyzed, but industry-wide private information is associated with a reaction that spreads to the whole industry. The decomposition also shows that target prices are based on an equal amount of private and public information, and that private information is mostly firm-specific.
    In the last chapter I turn my attention to hedge fund managers, a category of sophisticated users of analysts’ research. More specifically, I analyze how the remuneration structure of hedge funds affects the performance to investors to rationalize the persistent abnormal performance of hedge funds. I show that when managers expect to receive a performance fee payment, the commitment to deliver an absolute return, the decreasing returns to scale to which hedge fund strategies are subject, and the performance-linked remuneration combine with the income-maximizing behavior of managers to effectively align the interests of investors and managers. In consequence of the coexistence of these elements, managers have an incentive to control the size of the funds. Therefore, performance-diluting flows do not occur and abnormal performance persists. The model quantitatively reproduces many empirical facts about hedge funds.
  • Publication
    Accès libre
    Firm value and risk management in credit agreements
    (2014)
    Marami, Ali 
    ;
    Dubois, Michel 
    In this dissertation, I analyze the proxies used in literature as the determinants of firm value to identify the core variables in modeling firm value. Using these variables, I evaluate the impact of interest rate derivatives on firm value. More specifically, I find that interest rate derivatives imposed in credit agreements has a positive impact on firm value in contrast to those used voluntarily for which the motive behind the use of derivatives is not clear for equity holders. The impact of systematic risk in placement structure of debt is also studied. I show that the impact of systematic risk on cost of debt is higher for public debts compared to those for private credit agreements. However, the emergence of loan secondary market diminishes this difference.
  • Publication
    Accès libre
    Differences of opinion and stock returns
    (2010)
    Janunts, Mesrop
    ;
    Dubois, Michel 
    This dissertation comprises of four chapters. The first chapter reviews the literature on the relationship between differences of opinion and stock returns, with special attention to the use dispersion of analysts’ earnings per share forecasts in asset pricing. As reviewed, the literature is split on the relationship between forecast dispersion and stock returns both in terms of the direction of the relationship and in terms of the role of forecast dispersion. Therefore, to understand the causes of the dispersion-return relationship, I conduct detail analyses of the dispersion anomaly.
    The second chapter sheds a new light on the empirical relationship between forecast dispersion and stock returns by examining whether the relationship is robust to different dispersion measures and whether the dispersion-return relationship is related to other well-known financial anomalies. My results strongly suggest that contemporaneous dispersion is negatively correlated with future stock returns. Moreover, the dispersion-return relationship is most pronounced in smallest market capitalization stocks and is robust across different measures of forecast dispersion. Notably, my results show that the dispersion anomaly is not explained by previously documented phenomena such as accruals quality, asset growth, capital investment underperformance, and equity issue anomalies.
    To understand more about the dispersion-return relationship, it is necessary to understand the causes of forecast dispersion. The third chapter fills this gap by conducting a thorough analysis on the determinants of forecast dispersion such as firm risk, information asymmetries, forecasting difficulties, analyst conflicts of interest, herding. Evidence shows that forecast dispersion has several dimensions including information asymmetries and differences of opinion. On one hand, a group of analysts can have superior information. On the other hand, even when having the same information set, for example after earnings announcements, analysts revise their forecasts not necessarily in the same direction. Regression analysis shows that forecast dispersion is a function of firm’s risk, past performance, analysts’ differing information set, forecasting difficulty, and analyst conflicts of interest and herding. In other words, forecast dispersion is a complex concept and different factors simultaneously explain why analysts disagree in their forecasts. Overall, my analysis importantly suggests that we should be cautious when using forecast dispersion as a measure of firm riskiness or firm information environment.
    The fourth chapter investigates whether incorporating determinants of forecast dispersion as conditioning information in asset-pricing models helps capture the impact of the dispersion effect on raw and risk-adjusted returns of individual stocks (and not portfolios). I use four different specifications of the two-pass time-series regression models with time-varying betas, where betas vary with firm’s market value of equity, book-to-market ratio, and the corporate spread. Regardless of the method used for risk-adjustment, there is a strong negative relation between average returns and forecast dispersion. Moreover, my results show that accounting for the determinants of forecast dispersion reduces but does not eliminate the predictive power of forecast dispersion on stock returns. Remarkably, the determinants of forecast dispersion account for half of the profitability of dispersion strategy, thus substantiating the importance of the determinants of forecast dispersion in understanding the dispersion anomaly.
  • Publication
    Accès libre
    Three essays on corporate cash holdings
    (2009)
    Frésard, Laurent
    ;
    Dubois, Michel 
    This dissertation is constituted of three distinct chapters. The first chapter focuses on the real consequences of cash policy by examining how cash holdings influence firms’ behavior and performance in their product market. The paper provides compelling evidence that corporate cash policy encompasses a substantial strategic dimension. In particular, the analysis reveals that larger relative-to-rivals cash reserves lead to systematic future market share gains at the expense of industry rivals. Notably, the documented effect is exacerbated when rivals face tighter financing constraints and when firms interact intensively in their product market. Moreover, the competitive effect of cash contributes to increase firm value and operating performance. Cash-rich firms partly gain market shares by drawing down their reserves to increase capital and R&D investment, as well as to expand their work force. From a different perspective, firms’ cash policy significantly distorts rivals’ product market decisions. Particularly, the analysis shows that incumbents’ cash reserves restrain the entry of potential competitors and hamper the expansion of rivals by curbing both their investment and acquisition policies. The second chapter sheds new light on the process whereby firms accumulate their cash reserves, i.e. their savings decisions. Remarkably, the investigation illustrates that stock prices, and more importantly, the private information they contain, play a crucial role in explaining firms’ savings choices. I start by documenting that a firm’ savings are highly sensitive to its stock price. This positive association indicates that firms tend to transfer more resources into their cash balances when the market foresees valuable future prospects. Strikingly, such a precautionary mechanism turns out to be amplified when the market price contains a larger content of private investors’ information. Hence, the findings are consistent with the view that managers learn from observing the level of their stock price. Moreover, further test show that this defensive learning is not due to the uncaptured effect of market mispricing or financing constraints. Overall, the analysis importantly highlights that the nature and precision of the available information about firms’ future prospects are crucial ingredients of their saving choices. The last chapter takes a corporate governance perspective and investigates the effect of a U.S. cross-listing on the risk that cash holdings are channeled into value destroying ventures. In a nutshell, the analysis reveals that the potential for value destruction embodied in large cash positions is significantly lessened when foreign firms benefit from the strength of U.S. institutions and monitoring environment. Indeed, investors systematically place a valuation premium on the excess cash of foreign firms that cross-list on U.S. markets compared with that of their domestic counterparts. The uncovered excess cash premium turns out to be magnified for firms established in countries in which shareholder protection is weak. Also, in spite of a host of initiatives to develop governance quality worldwide, the valuation differential significantly persists over time and is still at work nowadays. In addition, the analysis further dissects the results and put in light that two complementary forces explain the excess cash premium of cross-listed firms. On one hand, investors perceive the strength of U.S. legal environment as effective to tie managers’ hand. On the other hand, the additional scrutiny by analysts and large investors that is associated with a U.S. listing also enhances investors’ confidence that cash holdings will not be dissipated.
  • Publication
    Accès libre
    Country versus sector influences and financial analysts' specialization
    (2007)
    Sonney, Frédéric
    ;
    Dubois, Michel 
    This thesis is made of three distinct chapters. The second and third chapters constitute the core of this work. Both focus on financial analysts and their performance depending on whether they are specialized along country or sector lines. The first chapter sets the stage of the analysis. It presents and evaluates the relative strength of country and sector factors in stock returns. Short abstracts of these three chapters appear below. Chapter 1 This paper investigates the relative influences of industrial and country factors in international stock returns. Until very recently, academic research has consistently found that country factors dominate industrial factors. This result is in contradiction with practitioners beliefs. This paper re-examines this issue by analyzing a sample of more than 4000 stocks quoted in 20 developed countries. We find that on average the country effect still dominates stock returns over the period 1997-2000. This result has to be interpreted with caution though, as an analysis that allows for time-varying relative influences demonstrates the rapidly increasing impact of industry effects in recent times. We find, in particular, that this trend is common to all 20 developed countries considered and not only to those that are member of the European Monetary Union. We interpret this result as evidence of the increasing globalization of international equity markets. Chapter 2 Brokerage houses normally structure their research activities along either country or sector lines. I investigate whether organizational structure affects the quality of financial analysts’ earnings forecasts. Specifically, I compare the performance of country-specialized financial analysts with that of sector-specialized financial analysts. The former issue forecasts considerably more accurately than the latter. Country specialists benefit from an informational advantage over sector specialists. A superior knowledge of country-specific factors, as well as geographical proximity between analysts and the firms they cover, are significant determinants of this advantage. Chapter 3 Brokerage houses usually organize their research activities along country or economic sector dimensions. We evaluate which research structure provides most value to investors. To this end, we study the relative information content of stock recommendations issued by country-specialized analysts versus those issued by sector-specialized analysts. Our findings reveal that the former issue more valuable recommendations. The strength of country-specific commonalities explains at least part of the out performance of country-specialized financial analysts. Surprisingly, while analysts’ geographical location has been shown in the literature to be a determinant of earnings forecast accuracy, it is not a source of a comparative advantage when it comes to stock recommendations.
  • Publication
    Accès libre
    On the properties of financial analyst earnings forecasts: some new evidence
    (2003)
    Bolliger, Guido 
    ;
    Dubois, Michel 
    The importance of information in the formation process of security prices has a long history. The dissemination of information can take on different forms depending on the legal constraints. However, in all developed financial markets, financial analysts play a prominent role in collecting, analysing and diffusing information. Financial analysts typically supply future earnings estimates and stock picking advices in the form of recommendations. Earnings estimates are the essential part of security valuation by analysts and investors. They have even become an integral part of financial reporting in the financial press. Early research has accumulated evidence that these estimates are optimistically biased. More recently, empirical studies have found that analysts' optimistic bias is lessening, that its extent differs across analysts, firm characteristics and countries. Broadly speaking, this dissertation investigates the determinants of financial analyst forecasts bias. In the first essay, I examine the relative accuracy of European financial analysts' earnings forecasts and its determinants. I show that the results obtained for US analysts can not be generalised to European analysts who face a seemingly different job market as well as several different institutional and economic environments. In the second essay, I investigate the influence of financial analysts' location on their performance. More precisely, I examine the relative performance of local versus foreign analysts on Latin American stock markets. I find foreign analysts to be more timely and more accurate than their local counterparts. In addition, I document stronger price reactions after foreign analysts' forecast revisions than after those of local analysts. The third essay is related to the declining pattern of financial analyst forecast bias. In particular, I investigate whether US CEOs compensation arrangements give CEOs incentives to manipulate analysts' expectations downward in order to release earnings that meet or beat market estimates. The results confirm this hypothesis. I document a strong link between expectations management and the relevant option component of CEO compensation, bonus plans, and the percentage of the company's shares owned by the CEO who manages it.
  • Publication
    Accès libre
    Seasoned equity offerings and their impact on the firm value
    (2003)
    Jeanneret, Pierre
    ;
    Dubois, Michel 
    The literature about capital structure is very dense but this density does not lead to establish a clear relation between capital structure and firm value. The seminal work of Modigliani and Miller (1958) states that under perfect market conditions, the capital structure choices are irrelevant to the firm value. This proposition cannot hold when market frictions are introduced in the analysis. From a theoretical standpoint, two main streams of models can be distinguished. First, trade-off models examine the existence of an optimal repartition between debt and equity. They are based on the hypothesis that the cash flows cannot be fully and symmetrically returned to every investors' type because of bankruptcy costs, corporate and individual taxes and characteristics of the output market (level of competition, production techniques and product specificities). Under these circumstances, firms can gain value in managing their capital structure. The repartition between debt and equity is said to be optimal when it maximises the firm value. However, this relation remains difficult to test empirically. The second theoretical stream is based on the hypothesis that market frictions prevent individual investors and market intermediaries to re-design efficiently and costlessly any financial assets. Therefore, firms have an incentive to issue specific securities to minimise the market imperfections impact on their value. Information asymmetry, agency costs, timing, flotation methods and underwriter's certification become the main determinants of the capital structure choices and they are better suited to explain the impact of these choices on the firm value. Unfortunately, the empirical literature lacks to clearly relate explanatory variables to the theory they should refer to. The dissertation proposes two empirical studies that examine the relation between equity financing and firm value, one at the announcement of the equity offering, the other over a long-term horizon. One contribution is to introduce the intended use of the proceeds as a discriminating variable to separate offerings realised in order to finance a specific investment project from those made to improve the capital structure. In both frameworks (short-term after the offering announcement and long-term post-issue horizon), the results in terms of valuation effect are sensitive to the issuer's type. A negative impact is observed but it is restricted to issuers that finance a new investment project. This valuation effect is explained by information asymmetry and timing on the short-run and by model uncertainty on the long-run. It is caused by an expected decrease in future earnings since financial analysts adjust their earnings forecasts downwardly short after the announcement or over a longer-term horizon. One explanation could be that investment projects financed with equity are, first, high-risk with a negative net present value and second, the market is unable to correctly estimate the impact on the firm value at the issue announcement. It needs time to infer the true model parameters so that it may adjust its anticipation about the stock prices correctly. Re-balancing the capital structure has no significant impact on the firm value. The main conclusions can be summarised as follows. First, the intended use of the proceeds allows to differentiate equity issue in terms of valuation effect and of the theories that explain this valuation effect. Second, valuable private information is revealed at the offering announcement. Third, the long-term stock under-performance after the offering is not due to investors' irrationality but to model uncertainty. Fourth and finally, almost half of the equity issues are made in order to improve the capital structure, which is consistent with the American and European CFOs' opinion that their financial policy is mainly driven by the concern of preserving their financial flexibility. Our results show that working on that financing flexibility has no impact on the firm value, as predicted by Modigliani and Miller (1958).
  • Publication
    Accès libre
    Analyse d'événement et dépendances temporelles des rentabilités boursières
    (2001)
    Bacmann, Jean-François
    ;
    Dubois, Michel 
    Dans ce travail, nous étudions les différentes techniques d'analyse d'événement. Ce type d'analyse consiste en la comparaison entre le comportement des rentabilités boursières de la firme ayant subi un événement et le comportement de ces mêmes rentabilités en l'absence d'événement. La difficulté principale réside dans le fait que ce deuxième type de rentabilités n'est pas directement observable. Par conséquent, il s'agit de modéliser la dynamique des rentabilités boursières. C'est pourquoi nous nous attachons à présenter les modèles et les tests statistiques développés et utilisés au cours des trente dernières années. Cette thèse analyse plus particulièrement trois aspects destinés à prendre en compte les dépendances temporelles des rentabilités boursières. Sur le long terme (3 à 5 ans), nous nous montrons que les techniques d'analyse d'événement sont perturbées par les phénomènes d'autocorrélations linéaires caractéristiques du momentum. Dans ce contexte, nous suggérons l'emploi de critères d'appairage de la firme subissant l'événement avec une firme non-événement. Ces critères doivent être choisis en fonction des différences entre l'échantillon événement et la population et doivent en particulier tenir compte de la performance passée des firmes. Sur le court terme (rentabilité journalière et hebdomadaire), nous nous attachons à modéliser l'hétéroscédasticité conditionnelle. Pour ce faire, nous employons des modèles GARCH. A l'aide de simulation de Monte Carlo et sur données réelles, nous montrons qu'une modélisation de l'hétéroscédasticité conditionnelle permet d'accroître la capacité de détection de l'impact d'un événement. Par ailleurs, nous introduisons un modèle à variables muettes permettant la mesure directe et le test des rentabilités anormales cumulées. Enfin, nous étudions l'impact de l'hétéroscédasticité conditionnelle sur les méthodes de détection des sauts de variance. Ce contexte correspond à une analyse d'événement inverse puisqu'un saut détecté est toujours imputé à un événement. Nous montrons en particulier que l'une des méthodes principales, l'algorithme ICSS, est incapable de distinguer l'hétéroscédaticité conditionnelle de l'hétéroscédasticité inconditionnelle. Par conséquent, nous proposons une nouvelle méthode en deux passes dont les résultats sur données simulées et sur un échantillon de marchés émergents se révèlent très satisfaisants.