Ayako Yasuda
Associate Professor of Management
Graduate School of Management
UC Davis
One Shields Avenue
Davis, CA 95616-8609
asyasuda@ucdavis.edu
Ayako Yasuda
Associate Professor of Management
Graduate School of Management
UC Davis
One Shields Avenue
Davis, CA 95616-8609
asyasuda@ucdavis.edu
With Alberto Manconi, Tilburg University, and
Massimo Massa, INSEAD
ABSTRACT: Using novel data on investors’ bond portfolios, we study the contagion of the crisis from securitized bonds to corporate bonds. When securitized bonds became “toxic” in August 2007, mutual funds retained the now illiquid securitized bonds and sold corporate bonds. Funds with negative flows or high liquidity needs liquidated more than others. Yield spreads increased more for corporate bonds whose pre-crisis bondholders were more heavily exposed to securitized bonds, compared to same-issuer bonds held by unexposed investors. The findings suggest that liquidity-constrained investors with exposure to securitized bonds played a role in propagating the crisis from securitized to corporate bonds.
A key culprit behind the precipitous price declines in credit markets during the financial crisis: mutual funds with short investing horizons... Published in CFO Magazine Online, July 2010.
With Massimo Massa, INSEAD, and Lei Zhang, NTU
ABSTRACT: We examine the effect of the investor horizon of institutional bondholders (e.g., mutual bond funds and insurance companies) on the leverage of the firm using a novel dataset. Our main finding is that the investment horizon of the firm’s bond investor base (measured as functions of (i) the average portfolio turnover of investors holding the firm’s bonds, or (ii) the prevalence of mutual funds among the firm’s bondholders as opposed to insurance companies) has a positive and significant effect on the leverage of the firm. The investment horizon of the firm’s bond investor base also has a positive and significant effect on the firm’s probability of issuing bonds, and a negative and significant effect on the firm’s probability of issuing equity and borrowing from banks. The results are robust to controlling for potential endogeneity of the investor-firm matching using geography-based instruments. Our results highlight the vulnerability of companies that depend on short-horizon mutual funds as primary bond investors.
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ABSTRACT: Using 1994–2009 data, we find that All-American (AA) analysts’ buy and sell portfolio alphas significantly exceed those of non-AAs by up to 7% per annum after risk-adjustments for investors with advance access to analyst recommendations. For investors without such access, top-rank AAs still earn significantly higher (by 4%) annual alphas in buy recommendations than others. AAs’ superior performance exists before (as well as after) they are elected, is not explained by market overreactions to stars, and is not significantly eroded after Reg-FD. Election to top-AA ranks predicts future performance in buy recommendations above and beyond other previously observable analyst characteristics. Institutional investors actively evaluate analysts and update the AA roster accordingly. Collectively, these results suggest that skill differences among analysts exist and AA election reflects institutional investors’ ability to evaluate and benefit from elected analysts’ superior skills. Other investors’ opportunity to profit from the stars’ opinions exists, but is limited due to their timing disadvantage.
If an investment bank has lucrative underwriting relationships, will its analysts necessarily produce lower quality research to the detriment of investors, because of their compromised objectivity? It is a question that academics have debated for over a decade, but one that seemed to take regulators by surprise after the bursting of the dotcom bubble in 2001, and the subsequent wave of corporate accounting scandals... Published in the Financial Times, April 2006.
with Andrew Metrick, Yale School of Management
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ABSTRACT: The Financial Principles Every Venture Capitalist Needs To Master! In Venture Capital and the Finance of Innovation, future and current venture capitalists will find a useful guide to the principles of finance and the financial models that underlie venture capital decisions. Assuming no knowledge beyond concepts covered in first-year MBA course, the text serves as an innovative model for the valuation of start ups, and will familiarise you with the relationship between risk and return in venture capital, historical statistics on the performance of venture capital investments, total and partial valuation—and more.
with Andrew Metrick, Yale School of Management
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ABSTRACT: We review the theory and evidence on venture capital (VC) and other private equity: why professional private equity exists, what private equity managers do with their portfolio companies, what returns they earn, who earns more and why, what determines the design of contracts signed between (i) private equity managers and their portfolio companies and (ii) private equity managers and their investors (limited partners), and how/whether these contractual designs affect outcomes. Findings highlight the importance of private ownership, and information asymmetry and illiquidity associated with it, as a key explanatory factor of what makes private equity different from other asset classes.
with Andrew Metrick, Yale School of Management
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ABSTRACT: This paper analyzes the economics of the private equity industry using a novel model and dataset. We obtain data from a large investor in private equity funds, with detailed records on 238 funds raised between 1993 and 2006. We build a model to estimate the expected revenue to managers as a function of their investor contracts, and we test how this estimated revenue varies across the characteristics of our sample funds. Among our sample funds, about two-thirds of expected revenue comes from fixed-revenue components that are not sensitive to performance. We find sharp differences between venture capital (VC) and buyout (BO) funds. BO managers build on their prior experience by increasing the size of their funds faster than VC managers do. This leads to significantly higher revenue per partner and per professional in later BO funds. The results suggest that the BO business is more scalable than the VC business, and that past success has a differential impact on the terms of their future funds.
Private-Equity Firms Make Far More Charging Investors, Says a Study... Published in the Wall Street Journal, September 2007.
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ABSTRACT: Using 1983-2002 U.S. data, we examine whether the quality differentials in earnings forecasts between reputable and non-reputable analysts vary as the severity of conflicts of interest varies. We measure personal reputation using the Institutional Investor All-American (AA) awards, and bank reputation using Carter-Manaster ranks. While both personal reputation and bank reputation are associated with higher-quality forecasts overall, their effectiveness against conflicts of interest differs. The severity of conflicts (proxied by the aggregate volume of new equity issues) has a negative and significant effect on the performance of non-AAs at top-tier banks relative to both AAs at top-tier banks and non-AAs at lower-tier banks. In contrast, the severity of conflicts has a positive and significant effect on the performance of AAs at top-tier banks relative to both non-AAs at top-tier banks and AAs at lower-tier banks. These findings suggest that personal reputation is an effective disciplinary device against conflicts of interest, while bank reputation alone is not.
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ABSTRACT: This paper examines the effects of bank relationships on underwriter choice in the Japanese corporate-bond market following the 1993 deregulation. Bank relationships have significant positive effects on a firm's underwriter choice. Relationship firms receive a small but significant fee discount and, consistent with mitigating effect of bank competition on holdup cost, multiple-relationship firms receive a significantly deeper discount than solo-relationship firms. Bank shareholding alone negatively affects underwriter choice, whereas shareholding together with loans have significantly more positive effects than loans alone. Finally, existing relationships reduce a Japanese firm's switching probability by 32%, in contrast to only 6% for U.S. firms.
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ABSTRACT: This paper studies the effect of bank relationships on underwriter choice in the U.S. corporate-bond underwriting market following the 1989 commercial-bank entry. I find that bank relationships have positive and significant effects on a firm’s underwriter choice, over and above their effects on fees. This result is sharply stronger for junk- bond issuers and first-time issuers. I also find that there is a significant fee discount when there are relationships between firms and commercial banks. Finally, I find that serving as arranger of past loan transactions has the strongest effect on underwriter choice, whereas serving merely as participant has no effect.
