Stephen Sapp received a Bachelor of Science degree with Distinction (mathematics and chemistry) from Mount Allison University, a Masters degree (applied statistics) from the University of Toronto and completed his Ph.D. (finance) at the Kellogg School of Management, Northwestern University. Before deciding to pursue his doctoral studies, he worked as a consultant at both the German Cancer Research Centre and the Centre for European Economic Research. Before coming to Ivey, Professor Sapp was an adjunct lecturer in Finance at Kellogg where he taught Investments.
Professor Sapp's research interests are concentrated in international finance. In particular, he is interested in how the globalization of financial markets has influenced the observed behaviour and interactions between investors and firms operating in diverse financial markets. In particular, Professor Sapp has examined how changing economic conditions influence financial decisions in global equity markets and the foreign exchange market. His research considers the effects at the level of both the individual trader as well as the overall market. Extending this work, he is studying how differences in the regulatory and corporate governance structures across countries influence firms' decisions. For example, how different ownership structures and corporate governance systems influence strategic decision-making, especially executive compensation.
Professor Sapp enjoys various outdoor activities such as golf, sailing, tennis, biking and all types of skiing.
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Sapp, S., (Forthcoming), "Maturity Diversification: the use of Foreign and Domestic Bonds", Finance Research Letters
Abstract: Raising capital to support the execution of an organization's strategy is one of the most important responsibilities of financial managers. In our analysis we examine the characteristics of issued debt, specifically the maturity and market of issuance. Our empirical analysis finds that firms issue bonds to diversify their bond maturity profile using both foreign and domestic markets. Although firms primarily raise debt using their domestic markets, they use both foreign and domestic markets especially at the short and long maturities. Beyond diversifying their maturity portfolio, borrowing decisions are influenced by factors such as asset maturity, credit worthiness, and transparency.
Link(s) to publication:
http://dx.doi.org/10.1016/j.frl.2024.106215
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Foerster, S. R.; Sapp, S.; Shi, Y. N., 2014, "The Effect of Voluntary Disclosure on Firm Risk and Firm Value: Evidence from Management Earnings Forecasts", Advances in Quantitative Analysis of Finance and Accounting, October 12: 179 - 213.
Abstract: This study investigates whether the voluntary disclosure of management earnings forecasts is associated with investors’ assessment of firm risk and firm value. We find a significant negative relationship between the issuance of management earnings forecasts and a variety of measures of firm risk (idiosyncratic risk, stock return volatility, beta, and bid-ask spreads). Considering specific features of the management earnings forecasts, we find more frequent, more precise and more accurate earnings forecasts are associated with a larger decrease in firm risk. Our results therefore suggest that information quality is an important determinant of both diversifiable risk and nondiversifiable systematic risk. We also demonstrate that management earnings forecasts are positively associated with firm value as captured by Tobin’s Q. More frequent, precise and accurate forecasts further enhance valuation premiums. Finally, we partition our sample into good news versus bad news forecasts, and show that the results are driven more by good news forecasts. Overall, releasing high-quality management earnings forecasts is associated with important capital market benefits.
Link(s) to publication:
http://dx.doi.org/10.2139/ssrn.2199587
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Foerster, S. R.; Fogler, L.; Sapp, S., 2014, "Northern Exposure: How Canadian Micro-Cap Stock Investments Can Benefit Investors", Journal of Investment Consulting, August 15(1): 36 - 50.
Abstract: Micro-cap stocks, a subset of small stocks, have the potential to provide additional diversification benefits and increased returns to investors. The ways that micro-cap stocks can contribute to investors’ actual portfolios have not been rigorously investigated. In this study, we examine micro-cap stocks in Canada and consider investability constraints and transaction costs that are overlooked in most other size-effect studies. We find that micro-cap stocks in Canada have relatively high returns and a low correlation to large stocks in Canada, the United States, and other developed markets. We conclude that these findings demonstrate that Canadian micro-cap stocks appear to represent a unique asset class and that investing in this unique asset class can improve the risk-return characteristics for global investors’ overall portfolios. We therefore suggest that global investors consider adding Canadian micro-cap stocks to their portfolios.
Link(s) to publication:
http://ssrn.com/abstract=2480182
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Sapp, S., 2008, "Sweet Deals - Canadian Regulators Need to Do a Better Job of Curbing Excessive CEO Pay Packages. Here's How", Canadian Investment Review, October 21(3): 18 - 23.
Abstract: The article discusses the ways by which Canadian regulators can curb the excessive chief executive officer pay packages. It was observed that the executive compensation is seen as a problem in Canada, but not at the same level as in the U.S. A report by the Institute of Corporate Directors Blue Ribbon Commission discusses how good governance can come from independent and diligent directors on the human resources committee following a strong process to design executive compensation packages.
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Foerster, S. R.; Sapp, S., 2005, "The Dividend Discount Model in the Long-Run: A Clinical Study", Journal of Applied Finance, October 15(2): 55 - 75.
Abstract: Finance professionals frequently value assets using fundamental valuation methods which discount the expected cash flows received by investors. Using information on the share price, dividend payments, and earnings for a single firm over a period of more than 120 years, we compare the actual share price to the expected price-calculated using several of the most commonly used fundamental valuation methods. Since these methods depend on the estimation of inputs-such as the discount rate and growth rate-we discuss the sensitivity of the expected prices to different estimation techniques and the relevant assumptions across various economic conditions. Over our entire sample period, we find that dividend-based models perform well at explaining actual prices they perform better than commonly used earnings-based models (such as the Fed Model).
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Foerster, S. R.; Sapp, S., 2003, "How Do Interest Rate Changes Affect Equities?", Canadian Investment Review, January 16(1): 26 - 34.
Abstract: This article address two important issues related to Canadian stock prices and interest rates. First, if interest rate changes drive stock prices, which is the most important type of interest rate? Second, after controlling for market risk, how do stocks in various industries react to interest rate changes? These questions are important for sector rotators and for hedge fund managers who might be attempting to develop a 'market neutral' position while unaware of the resulting interest rate exposure of their strategy. Although interest rate changes should impact on all stocks to some extent, interest-sensitive stocks should be more greatly affected by changing rates than other stocks. Because of this, the investigation is focused on interest-sensitive stocks, primarily financial institution stocks.
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