Three essays in finance
In essay one, The Impact of Information Asymmetry on Stock Split Announcement Returns, using research and development expenses as a proxy for information asymmetry, we examine the impact of information asymmetry on stock split announcement returns to provide support for the signaling theory. We find no significant difference between the announcement returns of firms with research and development expenses and those firms without research and development expenses. If the signaling theory holds, there should be a difference in these announcement returns due to the different levels of information asymmetry. As a result, the signaling theory is not supported in the context of stock splits. In the second essay, Do Mutual Fund Closures Cause the Decline in Fund Performance after Closing?, we find that closing a mutual fund is not effective at protecting fund performance but it is also not the cause of the decline in fund performance. We find that closed mutual funds do not display a consistent return pattern between the period before and after a fund closing indicating that fund closures do not have a common motivation or result. We also find that a matched group of non-closed mutual funds exhibit a return pattern that is similar to the one observed in closed mutual funds. As a result, closing a fund does not cause the decline in fund performance that is typically observed when a mutual fund closes. In the third essay, Hedge Fund Performance Before and After Fund Closure, we find that even in the place of a compensation contract that is different from the compensation contract of mutual funds, hedge funds that close exhibit a significant decline in fund performance after closing to new investors. Similar to mutual funds that close, the closure of a hedge fund is ineffective at protecting performance but it also not the cause of the decline in fund performance. Closed hedge funds do not display a consistent return pattern between the period before and after a fund closure indicating that fund closures do not have a common motivation or result. Analysis of a matched group of non-closed hedge funds shows that these non-closed funds exhibit similar growth and return patterns around fund closure again indicating that the closure of a hedge fund does not cause the resulting performance decline.