Honors Projects for Finance

Permanent URI for this collectionhttps://hdl.handle.net/10125/29573

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Feasibility of Microfinance Programs to Empower Women Entrepreneurship
(University of Hawaii at Manoa, 2024) Kelly, Emma; Holden, Kelly; Finance
Financial Ratio and Multiple Regression Analysis of Corporate Mergers
(University of Hawaii at Manoa, 2014-09-26) Young, James; Finance
The general concern of this paper is the utility of financial ratios in the assessment of corporate mergers. Recent literature has been highly critical of traditional ratio analysis as an analytical technique in assessing the performance of the business enterprise. Does this mean financial ratios are of such limited utility that they have virtually no place in the decision making process? The answer rests on whether or not financial ratios can be successfully transformed and subjected to the more rigorous statistical techniques such as multiple regression. The usual types of transformations are trends, in the case of time-series analysis, and financial ratios, in the case of cross-sectional analysis. The specific concern of this paper is financial ratios, for the utility of financial accounting in general, and decision making in particular, rests on the usefulness of these ratios. Thus, the question here is: Can financial ratios be used to predict the success or failure of a corporate merger? The utility of ratios can only be measured with regard to some particular purpose. Past studies have found ratios to be useful in predicting a business failure and corporate bond ratings. If ratios have been useful in these unrelated areas, it would be reasonable to assume they may have some use in assessing the outcome of a merger.
The Role of the Failing Company Defense in Modern Era Mergers and Acquisitions
(University of Hawaii at Manoa, 2014-09-26) Wong, Chiu-Yin; Finance
The 1980's was a revolutionary period. This was characterized by and unprecedented changes in the U.S., including the acceleration of global economic interdependence and the waning of U.S. economic might. Deregulation was in style, catalyzed by the Airlines Deregulations Act of 1978. The year 1981 ushered in Ronald Reagan as President, who intensified the government "hands off" approach. His administration not only drastically diminished the role of government but also unabashedly fostered big-business. Furthermore, the 1980's were fueled by a laissez-faire attitude that is rarely exhibited in this country, and created a wave of mergers and acquisitions unparalleled in history. During this span of time, 31,000 deals with a total value of $1.3 trillion were struck. (See Exhibit 1 for year-by-year figures.) The 1980's represented a striking departure from prior years of strict supervision. Since the late 1800's, the United States government had endeavored to limit the power of big business. Its primary concern was the maintenance of healthy competition and the prevention of monopolies or monopolistic tendencies, especially those resulting from mergers and acquisitions. In 1914, Congress enacted the Clayton Act (15 USC @ 18) to combat a variety of anticompetitive practices. Section 7 of the Clayton Act, which deals with mergers and acquisition, states that "no persons engaged in commerce or any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital...[where] the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly."
The Effects of Being "Socially Responsible" on Investors' Risk Perceptions
(University of Hawaii at Manoa, 2014-09-26) Wakuzawa, Bruce; Finance
The general purpose of this study is to determine whether the social responsibility issue is of great enough concern to the investment community to affect a corporation's common stock value. More specifically, the objective is to provide evidence to support or reject the hypothesis that companies deemed being more "socially responsible" are perceived of as less risky and are therefore, according to the Capital Assets Pricing Model, required to yield a lower rate of return. But before this objective can be achieved, a working definition of being "socially responsible" must be established. The social responsibility issue has been at the center of controversy for decades. Some claim the argument for corporate social responsibility is insightful and valid, while others call it pure rhetoric. Part of the reason for these divergent opinions is the lack of consensus as to what " social responsibility" means and entails. But while a universally acceptable definition has yet to be found, "social responsibility" does incorporate certain characteristics that most people agree upon. These attributes are well expressed by A. A. Sommer, Jr., an attorney actively involved in the area of corporate law and social involvement. He states, "[s]ocial responsibility means that a corporation voluntarily expends its resources to do something not required by law and without immediate economic benefits.” A set of guidelines known as the Sullivan Principles seems to be consistent with Mr. Sommer's definition of social responsibility. A sample of 39 companies subscribing to the Sullivan Principles was therefore selected to deter mine if any discernible changes in risk could be found after the firms agreed to abide by the principles.
Reform: Would the Expansion of Private Banking Sector Improve the Efficiency, Safety and Profitability of China's Banking Industry?
(University of Hawaii at Manoa, 2014-09-26) Tjiang, Desmond; Dawson, Steve; Finance
In 1995, the People's Republic of China (hereafter, China) has emerged from a mono-banking system (1949-1978) to a multi-banks' system. Its multi-banks' system consists of a central bank (the People's Bank of China) governing and regulating the four state specialized banks (the Agricultural Bank of China, the Bank of China, the Industrial and Commercial Bank, and the People's Construction Bank), comprehensive banks and foreign banks. Since 1978, China has reformed its banking system in respond to an increasing need of its developing economy. After Deng Xiaoping, Chinese de facto and paramount leader, gained power in 1976, China has started to move towards more market-oriented. The goal for China is to adapt capitalist ideas into its socialist society and economy. As a result, more private owned companies, with ownership shares offering to the public, have been established in China since then. For example, in 1994, there were over one million Chinese companies owned shares of private companies traded in the Shanghai Stock Exchange. In fact, there has been a record of 11 new private companies being listed in the Shanghai Stock Exchange on one day in January 1994. In addition, foreign companies have also increased their investment in China. The foreign investment in China has jumped from U.S. $19.58 billion in 1991 to $68.5 billion in 1992. This increase of foreign investment has promoted the development of market economy in China.
Identifying the Characteristics of Target Firms: A Regression Analysis
(University of Hawaii at Manoa, 2014-09-26) Teo, May; Finance
The purpose of this study is to identify a set of variables that best differentiate acquired companies from the nonacquired ones, by using both financial ratios and quantitative variables. The basic difference between previous studies and this is that none of the previous one uses qualitative variables to explain the effects that cannot be captured using financial ratios. Since the multivariate method has proven to be better predictor for events like bankruptcies, credit ratings, bond ratings, and acquisitions than univariate tests, a multivariate regression technique is employed in this study. Any technique that can predict acquisitions is both advantageous to management and investors. In identifying potential acquisitions, management can either use it for investment purposes or for defending against potential acquisition threats. In addition, such a technique may provide information to antitrust regulators concerning the capital structure, and profit margin. This paper is divided into six sections. The first involves a general illustration of the mergers and acquisitions trends in terms of the number of transactions and the values paid. In the following section, the basic literature reviews of the theories of mergers and acquisition, the formulation of hypotheses, and an illustrative case example on Phillips Petroleum will be discussed. The third section deals with the methodology of the empirical study. In this section, the basic study assumptions are made. In addition, the experimental design and approach of regression technique are discussed. The next section explains the empirical model and the classification ability of the model. The fifth section reviews and compare the results obtained from previous studies. The final section summarizes the contents. It also includes an evaluation of the model by stating the limitations and problems.
A Critical Analysis of the Debt Service Capacity of Developing Countries
(University of Hawaii at Manoa, 2014-09-26) Sumner, Sheryl; Finance
During the past several years the external indebtedness of developing countries, specially those which must import oil, has been the focus of much attention and concern. The basic issue is whether or not the amount of debt has become so large, relative to the developing countries' ability to service it, that there will be a series of defaults leading eventually to a collapse of the world's banking system. There is no consensus of opinion. In studies based on the debt level of developing countries it is as likely to be argued that the level is manageable as it is to argue that the world's financial system is facing a real and imminent crisis. The objective of this paper is to identify and evaluate the arguments raised on both sides of the issue. There are a number of international and domestic developments which have contributed to this concern including oil price increases, inflation, a reliance on debt to fund development plans, declining growth in industrialized countries, deteriorating balance of payments and the increased proportion of commercial bank lending to these developing countries. We begin with a look at the oil price increases.
The Initial Public Offerings of Foreign Companies in U.S.
(University of Hawaii at Manoa, 2014-09-26) Shao, Jun; Chua, Lena; Finance
In this paper, I examine the initial public offerings (IPOs) of foreign companies in U.S.. The paper is divided into two parts. In part I, I discuss why foreign companies seek listings in the United States (U.S.) stock markets, the regulations and requirements for their listings, and the costs involved. I also take a close look at the listings of Canadian companies in the U.S. markets. In part II, a sample of 108 foreign companies' IPOs in the U.S. during the 1977- 1988 period is analyzed. The underpricing of these IPOs is examined and compared to that of U.S. companies' IPOs. In addition, I set up a multiple regression model to test the relationship between the initial returns on these foreign new issues and different variables which proxy for ex ante uncertainty. The results of this study can provide investors some insights on the performance of foreign companies' IPOs.
Portfolio Insurance: First Impressions
(University of Hawaii at Manoa, 2014-09-26) Sen, Leow; Finance
Insurance in general serves as a means of pooling and transferring risk among the economic agents within a society. The more participants there are available, the greater becomes the possibilities of dissipating individual risk. By virtue of both individual and aggregate wealth, the insurance industry especially in developed countries like the United States and United Kingdom, is extremely large. The concept of portfolio insurance has only become more well known in the last decade (Luskin, [1988]). Despite its name, portfolio insurance is not the creation of the insurance industry so commonly known to us. The parallels between the two are limited. Portfolios in need of portfolio insurance are highly correlated to be insured through risk pooling like automobile and life insurance. Also, until recently, there existed no financial instruments with adequate liquidity and volume necessary for successful implementation of portfolio insurance. Chapter two will give us a better understanding of what portfolio insurance is. The portfolio insurance strategy has been a very fast growing investment strategy in recent years. After the decline of the stock market in 1973-74 due to a world recession, many pension funds retreated from the stock market. Stock market activity at that point was down. Portfolio Insurance would definitely appeal to these fund managers and lure them back into the stock market, increasing market activity. Portfolio insurance should not only appeal to pension or endowment funds which must at all cost maintain a minimum value but thereafter can afford to accept reasonable risks. Institutional investors whose funds they control are expected to return above average returns (through superior stock selection) but at the same time want to keep risk within a manageable level, should be interested in portfolio insurance too.
A Critical Analysis of the Correlation Between Interest Rates and Selected Securities
(University of Hawaii at Manoa, 2014-09-26) Rosare, Mel; Finance
With the federal deficit and the threat of fluctuating interest rates, it is important for investors to know the effects that interest rates have on securities. The causes of high interest rates and the significance of these causes are difficult to document, but it is possible to record the levels and incremental changes of interest rates along with the subsequent impact on securities. Currently, the stock market is plagued with the worries of rising interest rates which has resulted in a serious downtrend in stock prices. Since stocks are the most "visible" of securities, they will be the major focus of this report. However, both bonds (government issues) and gold prices will be covered. A few theories of interest-sensitive as well as some advice from money managers regarding strategies of investing, given an interest rate forecast, will be discussed. However, the processes behind economic forecasting are beyond the scope of this report. In addition to the theories of interest rate sensitivity, results from a recent correlation study will be presented; the correlational analysis was done on the College of Business' QSTAT program.
Return Characteristics of Fundamentally Screened Stock Portfolios
(University of Hawaii at Manoa, 2014-09-26) Riddle, John; Finance
This is advice Benjamin Graham gave "Intelligent Investors" sixteen years ago. In today's world of efficient markets, Graham's thoughts would be criticized on the grounds that stock prices reflect fully all relevant known information, and, in retrospect, only appeared unusually depressed because new information entered the market place, resulting in an upward revision of common stock valuation in general, or in particular individual issues. Evidence in this report suggests Graham's advice, at least regarding relative under- evaluation of individual issues, may have been sound and thus as it casts doubt on the Efficient Market Hypothesis (EriUi). Specifically, the EMH does not explain the return performance of portfolio subgroups developed using known information. Price-earnings ratios and quarterly earnings reports, used individually and together as fundamental screens, demonstrate ability to discriminate between portfolios offering positive and negative returns.
Valuation of Privately-Held Businesses
(University of Hawaii at Manoa, 2014-09-26) Onomura, Michelle; Finance
Business valuation, also referred as business appraisal, is a profession still in its infancy. It is, however, a profession that is growing rapidly as a greater number of people develop the need to accurately value businesses. This increased demand for valuation services arises out of the need to price a firm when ownership changes or to determine a value in property settlement disputes, estate valuations, partnership dissolutions, and other legal proceedings. Most of the time, however, the need exists to accurately value a firm for buy and sell transactions. In the United States alone, virtually thousands of businesses change ownership every year. Given this need for valuation services, it is surprising that only recently has business valuation begun to emerge as a unified discipline in the United States.
The Effect of Government Regulation on the Land Development Process: Two Case Studies
(University of Hawaii at Manoa, 2014-09-26) Okazaki, Cynthia; Finance
Growth and development were encouraged in Hawaii after World War II and particularly after Statehood. During the post-war period, there was an impetus for the expansion of Hawaii’s economy, an increasing demand for housing, and a belief that there existed a large amount of underdeveloped land. However, due to the rapid and piecemeal urbanization of agricultural land (agriculture was central to Hawaii’s economy) and the nationwide environmental movement of the late 1960s, there has recently been a weakening of support for development and a movement toward the implementation of land development controls. County controls such as general plans and zoning, have become more sophisticated. In addition, “development plans,” the newest form of county control, are being prepared for the major urban centers on Oahu. On the State level, a Land Use Law was enacted in 1961. This law established a nine-member Land Use Commission which was given the power to classify lands into four districts: Agriculture, Conservation, Rural, and Urban. In addition to the State Land Use Law, statues pertaining to land use such as the Coastal Zone Management Law and the Shoreline Setback Law, have recently been enacted.
An Overview of the Asian Over-the-Counter Markets
(University of Hawaii at Manoa, 2014-09-26) Miyashiro, Cyd; Finance
In the 1990's, Nasdaq experienced tremendous growth and established itself as a leading securities exchange. From 1990 to 2000, Nasdaq quadrupled in market capitalization from$321 billion in 1990 to $3.6 trillion in 2000. The Nasdaq Composite Index is up 91% since 1996, out performing the New York Stock Exchange. Currently 57% of the public companies on the three major U.S. exchanges are listed on Nasdaq (Market Performance and Highlights, 2001). Small and medium and sized enterprises (SME) benefited from Nasdaq's multi-dealer market structure and placed the market in an advantageous position for their listings. In the 1990's, Nasdaq played an integral role in the increased focus on technology in the United States. Asia, hoping to mirror the United States' success, has created similar over-the-counter (OTC) markets. Over the last decade, Asian countries have created Nasdaq-modeled OTC markets with the intention of increasing investment opportunities and access to capital. This study focuses on Nasdaq modeled over-the-counter markets in Asia. Compared to Nasdaq, which opened in 1971, the Asian OTC markets are relatively young. With the exception of Singapore, which opened in 1987, the Asian OTC markets were created between 1994-1999. Because these markets are a new development in financial markets, they are virtually unknown. The objective of this study is to present descriptive data and analysis to enhance the overall understanding of the Asian OTC markets. The study offers a comparative survey of the current market environment, and provides an overview by focusing on market summary statistics, performance and correlation. The study includes (1) Hong Kong's Growth Enterprise Market (GEM), (2) Japan's Jasdaq, (3) Korea's Kosdaq, (4) Malaysia's Mesdaq, (5) Singapore's Sesdaq, and (6) Taiwan's GreTai Securities Market (GTSM). The markets are studied from two viewpoints, compared to the benchmark Nasdaq and compared to the country's main board. The study consists of a (1) literature review, (2) background on the OTC markets, (3) data collection methods, and (4) summary statistics, market performance, and correlation and benefits of diversification.
The Enterprise Zone: Assessment and Evaluation of Program Performance
(University of Hawaii at Manoa, 2014-09-26) Manzano, Elysa; Finance
The success of the enterprise zone theory relies upon the participation of numerous local, small businesses that provide employment opportunities for residents in the area. The enterprise zone seeks to create an environment conducive to the encouragement of small, private businesses. It is where state and federal governments join forces to facilitate investment and employment in order to generate economic revitalization in distressed areas and to reinstate private-sector activity. Thus, all stakeholders involved benefit through the implementation of this radical new program. We will begin by examining the birth of the enterprise zone idea in England when Sir Geoffrey Howe spoke at a conference to expand on Peter Hall's initial Freeport Plan. Next we will see how the enterprise zone idea spread to the United States. We will examine the ways in which it was first introduced and also discuss performance reviews of the program. Then, we will move to the focus of the review, mainly enterprise zones in Hawaii and the analysis of cumulative successes and weaknesses to examine possible solutions as further implications for the future of Hawaii's enterprise zone program. The future of the program depends on early success and expansion of the initial number of zones and businesses. Following these discussions, we will conclude this essay with a review of the analysis. Thus, we will attempt to assess the benefits associated with the implementation of the enterprise zone program and determine whether Hawaii's program is being most efficiently and effectively utilized.
A Critical Evaluation of the Hawaii Housing Authority Housing Loan and Mortgage Program
(University of Hawaii at Manoa, 2014-09-26) Maeshiro, Brian; Laitila, Edward; Finance
The 1979 Hawaii State Legislature authorized the issuance of $125 million in revenue bonds for the Hawaii Housing Authority’s and Mortgage Program more commonly known as Hula Mae. The proceeds of the bonds were used to provide loans to low- and moderate-income families at lower than conventional mortgage interest rates. On June 17, 1980, Governor George Ariyoshi signed into law, legislation for a second $100 million Hula Mae offering. Since high interest rates cause higher monthly mortgage payments, the Hula Mae program was geared towards “the gap group” - a group with income too high to qualify for federal rent subsidies, and too low to qualify for home ownership. The Hula Mae program was intended to provide an opportunity for home ownership to people who could not have qualified in any other way. The purpose of the Hula Mae program was to alleviate the shortage of long term financing at affordable interest rates, which the Legislature felt was a major cause of the continuing housing problem in Hawaii. This paper is designed to analyze the characteristics of the participants in the first Hula Mae offering and determine whether these borrowers could have qualified under various mortgage financing alternatives. The null hypothesis is: The Hula Mae program participants could not have qualified for alternative mortgage financing during the period of the Hula Mae loan program. The alternative hypothesis is: The Hula Mae program participants could have qualified for alternative mortgage financing during the period of the Hula Mae loan program.
Foreign Assistance a Study of the World Bank's Lending
(University of Hawaii at Manoa, 2014-09-26) Luangkhot, Tiane; Finance
Much concern on the international scene has been on debt to less developed countries (LDCs). News about a world financial crisis are common. Reasons for this were the quadrupling of oil prices and the world wide recession in 1973, which hit the poorest countries the hardest. "Their fuel bills and the cost of their development projects increased dramatically, while demand for their exports fell as a result of the recession in industrial countries.” The following table shows LDCs long term debt to private banks, other governments, multilateral financial institutions and other private lenders.
An Examination of Mao Tse-Tung’s Self-Reliance Principle in Foreign Trade, and Whether Chinese Leaders Have Been Following It to Achieve National Goals
(University of Hawaii at Manoa, 2014-09-26) Leung, Chung; Finance
In October 1949, under the leadership of Mao Tee-Tung, the Chinese Communists took over the war-disrupted, inflation-torn, and fragmented economy of China. Mao, facing the legacy of economic backwardness and chaos in 1949, vowed to reconstruct China through "self-reliance". The concept of "self-reliance" was used during the civil war years and later during periods from 1949 to 1976. Adherence to this concept was alternatively emphasized and deemphasized during different periods of economic development from 1949 to 1976. Since the Chinese have been ambiguous about the self-reliant principles in foreign trade, I shall use both Western and official publications of the Chinese government to illustrate the Chinese foreign trade policies during different periods. There are different interpretations of Mao's self-reliant policy. Mao himself did not define how much trade is considered as self-reliant. For the purpose of this thesis, I shall use Eckstein's interpretation of the self-reliant policy ---A deliberate pursuit of an import-substitution and import-minimization policy. The objective of this thesis will be to explain the origins and objectives of Mao's self-reliant policy and to examine its effect upon Chinese attitudes toward foreign trade during periods of economic development since 1949. The recent reported changes in Chinese foreign trade policy under Teng Hsiao-Ping and Hua Kuo-Feng will be evaluated to see whether they are a continuation of Mao's self-reliant principles or whether they represent a departure from Mao's line.
An Evaluation of the Use of Preferred Stock by Commercial Banking Concerns
(University of Hawaii at Manoa, 2014-09-26) Lee, Sheldon; Finance
The objective of this thesis is to analyze the use of preferred stock as a means of raising bank capital. This is performed with particular reference to the $14 million issue floated by Bancorp Hawaii in August of 1980. The banking industry is undergoing tremendous change. Unprecedented and fluctuating interest rate levels are changing the management of banks. New players are entering banking's traditional turf, the accumulation and lending of funds. With deregulation, the competitive environment is changing and banks may be unable to compete or to take advantage of the opportunities available because of inadequate capital positions. Thus, obtaining access to adequate supplies of capital and developing new sources of capital are challenges facing bank financial managers. In the past, preferred stock has been a relatively neglected source of capital for U.S. corporations. Debt issues have provided most of the externally raised funds. Both debt and preferred stock are senior securities, in that they rank ahead of common stock, yet there is an important difference to bank managers: preferred stock can be included in certain capital measures used in the regulation of banks while debentures cannot. Given this potential advantage, this paper will analyze the advantages and disadvantages of using preferred stock as a source of capital for commercial banking concerns. Part I of this paper investigates the present capital position of the banking industry, describes the general characteristics of preferred stock issues, compares the relative advantages and disadvantages of using preferred stock, and presents a method of analyzing the use of preferred financing by banks. Part II of this paper focuses on a specific issue of preferred stock, the $14 million issue floated by Bancorp Hawaii. Part II applies the methodology provided in Part I to an actual preferred stock issue.
Development of Property Rights in Hawaii: Ancient Hawaii to The Great Mahele
(University of Hawaii at Manoa, 2014-09-26) Lau, Yvonne; Ordway, Nicholas; Finance
The changes in land ownership encountered by the Indians of the American southwest and those near Quebec, are the basis by which Howard Demsetz composes his theory of property rights. The major part of this paper will evaluate the applications of Demsetz's theory to the Hawaiian system of land ownership. Although the Hawaiians and American Indians share many similarities, the Hawaiians had a very different system of land ownership. Rather than offering an explanation of forces determining the price and number of units of a good to which property rights are attached, Howard Demsetz searches for elements that comprise an economic theory of property rights. Demsetz divides his article into three parts. First he discusses the concept and role of property rights in social systems. Second, Demsetz provides guidance to identify the emergence of property rights. Lastly, Demsetz gives some principles important to the grouping of property rights into specific bundles and the determination of the ownership structure associated with these bundles.

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