Browsing by Author "Guedhami, Omrane"

Now showing 1 - 3 of 3
  • Thumbnail Image
    Economic policy uncertainty and allocative distortions
    Guedhami, Omrane; Mansi, Sattar A.; Reeb, David; Yasuda, Yukihiro (2021-12-14)
    We introduce this special issue on Economic Policy Uncertainty (EPU) with a focus on how EPU affects allocative efficiency. We observe that EPU affects the market value of firms in about 37% of Fama–French 30 industries, but leads to lower investments in 90% of them. Allocation decisions in a market economy rely on signals from the capital market, which EPU distorts. This may cause increasing conflicts of interest between managers and investors. We highlight key studies in the EPU literature and then describe each paper in this special issue. We also provide suggestions for future research.
  • Thumbnail Image
    Economic Policy Uncertainty, Institutional Environments, and Corporate Cash Holdings
    El Ghoul, Sadok; Guedhami, Omrane; Mansi, Sattar A.; Wang, He Helen (2022-10-11)
    We investigate the effect of economic policy uncertainty (EPU) on corporate cash holdings using a large sample of international firms. EPU intensifies concerns of investors on managerial self-dealing and political extraction. Consequently, the potential cost of cash holdings (i.e., expropriation) outweighs its benefit (i.e., precautionary motives), and the optimal amount of cash holdings decreases. We find supportive evidence that firms hold less cash when EPU is high. We further show that the market discounts excess cash holdings under high policy uncertainty, but this negative effect is mitigated by stronger investor protection, better freedom of press, and better government quality.
  • Thumbnail Image
    Institutional Shareholder Attention, Agency Conflicts, and the Cost of Debt
    El Ghoul, Sadok; Guedhami, Omrane; Mansi, Sattar A.; Yoon, Hyo Jin (Institute for Operations Research and Management Sciences, 2020-01-15)
    Using Kempf, Manconi, and Spalt’s (2017) measure of shareholder inattention, constructed from exogenous industry shocks to institutional investor portfolios, we find that firms with distracted shareholders are associated with a higher cost of debt. This effect is stronger for firms with more powerful CEOs, higher information asymmetry, and those operating in less competitive product markets. Further testing suggests that the inattention–cost of debt relation is driven primarily by dual holders directly observing shareholder distraction. Our results are robust to controlling for inattention at the retail investor level and to other external monitors, including credit rating agencies, financial analysts, and Big 4 auditors. Overall, our evidence suggests that institutional shareholder inattention has an incrementally negative effect on bond pricing.