Home appraisal came under scrutiny for contributing to the home‐price bubble and enabling the origination of risky mortgages that led to the post‐2006 foreclosure crisis. Subsequent regulations tried to minimize or eliminate conflicts of interest and improve valuations. Nonetheless, our study of appraisals completed in 2015 and 2016 find that appraisal bias still occurred. Our analysis delves into

Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank‐borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower‐friendly loan provisions. Credit line adjustments occur within

ABSTRACT

Using a large international sample from 1995 to 2018, we find that individual analysts’ earnings forecasts accompanied with cash flow forecasts are more accurate than those not accompanied with cash flow forecasts, suggesting that the findings for the United States in Call et al. (2009) apply to other countries. In addition, using a difference‐in‐differences design, we find that the positive association

The Society for Financial Society (SFS) is a global, nonprofit academic society in finance. It owns and runs three academic journals: (1) the Review of Asset Pricing Studies, (2) the Review of Corporate Finance Studies, and (3) the Review of Financial Studies. It also organizes two annual academic conferences: (1) the SFS Cavalcade Asia-Pacific and (2) the SFS Cavalcade North America. It also runs

The global COVID-19 pandemic has caused a transformation of virtually all aspects of the world order today. Due to the introduction of the world quarantine, a considerable share of professional communications has been transformed into a format of distance interaction. As a result, the specific weight of traditional components of the investment attractiveness of a region is steadily going down, because

Most studies on the determinants of poverty do not consider that the relative importance of each of these determinants can vary depending on the degree of poverty suffered by each group of poor people. For Mexico’s case, the studies carried out so far do not contemplate this approach, even though there is wide variation in the degree of poverty among the different groups of the poor. Investigating

The global COVID-19 pandemic has caused a transformation of virtually all aspects of the world order today. Due to the introduction of the world quarantine, a considerable share of professional communications has been transformed into a format of distance interaction. As a result, the specific weight of traditional components of the investment attractiveness of a region is steadily going down, because

Most studies on the determinants of poverty do not consider that the relative importance of each of these determinants can vary depending on the degree of poverty suffered by each group of poor people. For Mexico’s case, the studies carried out so far do not contemplate this approach, even though there is wide variation in the degree of poverty among the different groups of the poor. Investigating

The Society for Financial Society (SFS) is a global, nonprofit academic society in finance. It owns and runs three academic journals: (1) the Review of Asset Pricing Studies, (2) the Review of Corporate Finance Studies, and (3) the Review of Financial Studies. It also organizes two annual academic conferences: (1) the SFS Cavalcade Asia-Pacific and (2) the SFS Cavalcade North America. It also runs

The research presented in this paper provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their surprising consistency with financial markets. However, they bring several challenges alongside. Most noticeably, even simple nonlinear financial derivatives as vanilla

Various trend-following trading rules have been shown to be valuable for predicting market directions and thus the formulation of investment strategies. However, recent equity market research has provided striking evidence that the predictive power of such rules appears to diminish over time due to increased investor attention and lowered arbitrage barriers. Given that trend-following rules are also

A significant litigation trend is the rise in lawsuits filed against boards of directors following cybersecurity incidents. We perform an experiment to examine factors we predict will influence directors’ litigation risk. We examine whether jurors are more likely to hold directors liable when a company previously experienced an immaterial cyberattack, and whether subsequently implementing the American

This paper is based on the theory of hybrid organizations and we investigate the context, factors, mediators, and outcome of a public scandal involving a Romanian state-owned company in the civil aviation sector. This retrospective case study is part of a research design that alternates between inductive and deductive procedures devised to test relevant hypotheses, integrate several theories, and construct

Agency based studies provide conflicting predictions about the relation between CEO inside debt and corporate payout policy. This study argues that market structure provides an empirical setting to test when and how inside debt influences corporate payout policy. Using a large sample of US corporations for the period 2006–2016, it finds that CEO inside debt is positively related to the propensity and

This study examines whether geopolitical risk (GPR) exhibits an ability to forecast crude oil volatility from a time-varying transitional dynamics perspective. Unlike previous studies that assume an oversimplification of the fixed transition probabilities for crude oil volatility, we develop an asymmetric time-varying transition probability Markov regime switching (AS-TVTP-MS) GARCH model. In-sample

In this study we provide evidence on how accounting disclosures can motivate social movement organizations (SMOs) to create a new source of normativity in an organizational field, to impact upon firms through identity, image and culture. The source of normativity, the Business Benchmark on Farm Animal Welfare (BBFAW), was created as a means of accounting for farm animal welfare by food companies. Working

Over recent years stricter EU capital requirements have resulted in constraining bank lending to SMEs. Alternative finance is expected to ease such constraints, but what would it be its impact on bank fragility? This paper examines whether alternative finance for Small and Medium Enterprises (SMEs) in the euro area would moderate bank fragility. We employ a bank profit model from which we derive a

We analyze the funding of start-up companies across financing rounds, focusing on the dynamic interactions between angel investors and venture capitalists. Using unique data from British Columbia, Canada, we show that angels and venture capitalists are dynamic substitutes. This substitutes pattern applies across the performance range of companies. It is less pronounced for serial angels. An instrumental

The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum Tier 1 regulatory capital threshold from 4 to 6 percent. It also emphasizes the need to improve timeliness of loan loss provisions. Using a sample of European banks, we examine the impact of this regulation on banks’ discretionary loan loss provisioning behavior. Underscoring banks’ increased incentives

We analyze whether price fixing firms modify their Corporate Social Responsibility (CSR) activities around the revelation of the corporate misconduct. Our paper is the first empirical study to specifically explore the timing and the stability of the new CSR investments in firms involved in corporate misconduct. Our results show that firms that participate in illegal price fixing schemes increase their

In this paper, we test the consistency of the q5 model of Hou et al. (2019, 2020) with Merton’s (1973) intertemporal capital asset pricing model (ICAPM) framework. We find that all but one factors in the q5 model carry significantly positive covariance risk prices. The profitability factor, however, has little explanatory power for the cross-section of expected returns. The time-series tests show that

Using hand-collected governance data and a two-stage least squares approach to control for the endogeneity of firm governance structure, this paper shows that private investments in public equity (PIPE) issuers with higher board independence grant investors lower price discounts and experience improved announcement effects, improved long-run operating and stock performance, and increased investment

We examine the effects of large seasoned equity offerings (SEOs) on industry rivals. We provide evidence that rivals react positively to completed SEOs in their industry and negatively to SEO withdrawals. These short-term SEO effects are stronger in the case of primary offerings than in the case of secondary offerings. Rivals also appear to experience improvements in their long-run financial and operating

Cloud accounting represents a major disruptive technology for the accounting industry. This qualitative study used semi-structured interviews to collect data from eight small and medium accounting practices (SMPs) to test a preliminary model of the determinants and impact of cloud-based client accounting adoption by SMPs. Accordingly, the SMP was the unit of analysis. The complex triadic relationship

Cryptocurrencies and blockchain technology are disruptive innovations at the vanguard of a new wave of the digital revolution. The far-reaching appeal, global reach, unprecedented mobility of capital, and multitude of trading venues have created a marketplace like no other. The economic fundamentals underlying this market are yet to be fully comprehended, as evidenced by the often-contradicting guidelines

Portfolio “glidepaths” accommodate growth in a worker’s early working life and transition to lower risk settings as the worker nears retirement. The success of this design hinges on its objective of amassing wealth at the date of retirement, but the design offers little in the way of a solution for the provision of income during retirement. The relevant risk for workers is retirement income uncertainty

Expenditures on the creation of intangible capital have increased, but accounting standards have not kept pace. We investigated whether this has affected the value relevance of book value and earnings. We constructed a composite measure of intangible intensity by which to classify industries. The measure is based on intangible assets capitalized on the balance sheet; research and development expenditures;

We investigated the relationship between corporate environmental, social, and governance (ESG) performance and litigation risk by examining US class action lawsuits. We found that a 1 standard deviation improvement in the ESG controversies of an average company in the sample reduced litigation risk from 3.1% to 2.4%. Moreover, an average company with low ESG performance exhibited a loss in market value

In the study reported here, we explored high-frequency algorithmic trading and its effect on exchange-traded funds (ETFs). Using the cancel rate, the trade-to-order ratio, percentage odd-lot volume, and trade size as proxies for algorithmic trading, we found that more algorithmic trading in ETFs results in smaller and less persistent deviations of fund prices from their net asset values (NAVs). Arbitrage

Performance regressions lever expected benchmark returns linearly to the risk exposures of the fund. The interest rate (IR) risk premium, however, usually follows a decreasingly upward-sloping yield curve, characterizing the nonlinearity between expected return and IR risk exposure—for example, maturity or duration. If the exposures of the fund and the benchmark differ, this discrepancy causes alpha

We propose a cohort model that evaluates hedge funds against peer groups executing similar investment strategies formed by using return correlations. Our method improves the identification of skilled managers, as evidenced by a strong ability to explain hedge fund returns out-of-sample, with cohort alpha being more persistent than alpha based on the widely accepted seven-factor model. A hedge fund-of-funds