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Scott B. Smart - Indiana University, Kelley School of Business. Bloomington, IN, US

Scott B. Smart Scott B. Smart

Clinical Professor of Finance | Indiana University, Kelley School of Business

Bloomington, IN, UNITED STATES

Scott B. Smart researches corporate governance.

Secondary Titles (2)

  • Associate Chair of the Full-Time MBA Program
  • Fettig/Whirlpool Faculty Fellow

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Scott B. Smart Publication Scott B. Smart Publication

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Industry Expertise (1)

Education/Learning

Areas of Expertise (3)

M&A IPOs Corporate Governance

Accomplishments (3)

MBA Teaching Award

MBA Teaching Award, 1994-2000, 2002

Doctoral Student Association Teaching Award

Doctoral Student Association Teaching Award, 1995

Distinguished Service Award

Distinguished Service Award, 1997-98, 2009-10, 2012-13

Education (3)

Stanford University: Ph.D. 1991

Stanford University: M.A. 1990

Baylor University: B.B.A. 1983

Articles (5)

Stock Price Effects of Mandatory Exchangeable Debt International Advances in Economic Research

Anna N. DanielovaScott B. Smart

2011

We study mandatory exchangeable debt offerings. A firm that issues mandatory exchangeable debt requires bondholders to exchange their bonds for shares of the underlying firm in which the issuing firm has a stake. We find significant announcement (−3.3%) and long-run (−13%) abnormal price declines for underlying companies. The evidence is consistent with the hypothesis that mandatory exchangeable debt issuers exploit private information that they possess to issue mandatory exchangeable debt when the underlying stock is overvalued.

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Earnings Quality and International IPO Underpricing The Accounting Review

Thomas J. Boulton, Scott B. Smart, and Chad J. Zutter

2011

This study examines the impact of country-level earnings quality on IPO underpricing. Examining 10,783 IPOs from 37 countries, we find that IPOs are underpriced less in countries where public firms produce higher quality earnings information. This finding persists after controlling for other deal- and country-specific factors that affect IPO underpricing, and it is driven neither by the large and relatively transparent markets in the U.S. and U.K. nor by the relatively opaque Japanese market. The impact of low earnings quality on underpricing is partially offset by the use of a top-tier underwriter.

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Acquisition Activity and IPO Underpricing Financial Management

Thomas J. Boulton, Scott B. Smart, Chad J. Zutter

2010

We propose an “M&A activity” hypothesis as a partial explanation for initial public offering (IPO) underpricing. When going public during active corporate control markets, managers may take actions to safeguard their control. In support of this conjecture, we find that pre‐IPO M&A activity directly explains IPO underpricing. We also find that underpricing and ownership dispersion are positively correlated, as are ownership dispersion and the probability of remaining independent. Considering the possibility that some managers take their firms public to be acquired, we find that the positive link between M&A activity and underpricing is not robust for firms that are viewed as likely targets.

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What motivates exchangeable debt offerings? Journal of Corporate Finance

Anna N. Danielova, Scott B. Smart, John Boquist

2010

Debt that is convertible into shares of a company other than the issuer is called exchangeable debt. Most firms that issue exchangeable debt hold large blocks of shares in several companies, and in this paper we study factors that influence the selection of a particular block to serve as the underlying asset for an exchangeable debt issue. Comparisons between issuers' holdings in different firms shed light on issuers' performance as monitors as well as their ability to engage in market timing. Holdings attached to these issues display superior past operating performance, but after the offer, both operating performance and stock returns decline. In contrast, we do not find similar systematic performance patters for the “other holdings” of exchangeable debt issuers.

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IPO underpricing and international corporate governance Journal of International Business Studies

Thomas J Boulton, Scott B Smart, Chad J Zutter

2010

It is well established that a link exists between a country's legal system and the size, liquidity, and value of its capital markets. We study how differences in country-level governance affect the underpricing of initial public offerings (IPOs). Examining 4462 IPOs across 29 countries from 2000 to 2004, we find the surprising result that underpricing is higher in countries with corporate governance that strengthens the position of investors relative to insiders. We conjecture that when countries give outsiders more influence, IPO issuers underprice more to generate excess demand for the offer, which in turn leads to greater ownership dispersion and reduces outsiders’ incentives to monitor the behavior of corporate insiders. In other words, underpricing is a cost that insiders pay to maintain control in countries with legal systems designed to empower outsiders. Consistent with this control motivation for underpricing, we find that underpricing has a negative association with post-IPO outside blockholdings and a positive association with private control benefits. In addition, firms whose insiders are entrenched either by majority ownership or by dual-class structures do not underprice more in countries with better governance. In these firms the ownership structure protects managers from outside influence, eliminating the incentive to increase outside ownership dispersion through underpricing.

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