Following
on from my post last week, Apple announced yesterday that it will pay its first
dividend in 17 years and repurchase $10 billion of its stock. How did investors
respond? They seemed to like the news as Apple stock went up by 2.65%. Why? One
possible reason is that Apple could be signalling that it is confident that
future cash flows are going to be high. Another possibility is that by paying
out some of its $98.6b in cash, it is assuring investors in a post-Jobs world
that managers will not dissipate cash flows.
Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...