We investigate new institutional investors that do not receive initial public offering (IPO) allocations but invest in the newly public firms after IPOs. We find that many institutions buy the stocks of IPO firms in the post‐IPO secondary market over time. In contrast to retail investors who chase hot IPOs, these new institutions invest in IPO firms with lower valuations at offerings and better fundamentals

We analyze the role of firm‐level corporate governance in determining the precommitment payout policy of emerging market firms and investigate whether there is a precommitment life‐cycle effect. Unlike previous studies of U.S. firms, we find evidence of precommitment only among relatively well‐governed firms, which combine good governance with large dividend payouts to shareholders and large debt‐related

This study investigates whether the round‐number heuristic affects investors’ selection of trading time in the international market. We document the existence of round‐time biases, as evidenced by trading activities intensifying at second 0 of one minute. Our further examination suggests that the round‐time anomaly is likely driven by algorithmic trading from institutional investors. Consistent with

This study investigates the second‐moment response to tweets from US president Donald J. Trump in the US stock market. We report that Trump's tweeting activity significantly and positively affects the volatility and jumps in our sample's later period. The response of realized volatility to tweets is greater than that of continuous volatility due to the realized volatility's jump component. These results

Using propensity score matching, we provide new evidence of a non‐monotonic relationship between the number of anti‐takeover provisions (ATPs) a firm adopts, relative to peer‐matched firms, and takeover likelihood. Firms with either a relatively low or high number of ATPs are significantly less likely to be a takeover target. We argue that this outcome is a result of the expected benefits versus costs

Common explanations for the observed rise in excess bank reserves include payment of interest on reserves and liquidity regulations, but capital regulations may also matter. We show that a profit maximizing bank substitutes from higher risk‐weight loans to lower risk‐weight reserves and Treasuries if the risk‐based capital ratio, but not the leverage ratio, increases. Estimated treatment effects for

We identify new country characteristics that influence cross border equity flows: income inequality, autocracy, and sovereign wealth funds. Using 149 source countries and 34 OECD host countries for 2002‐2013, we find that OECD host countries receive higher Foreign Portfolio Investment (FPI) inflows from source countries with high income inequality and source countries with a sovereign wealth fund;

We examine whether the presence of loan covenants leads firms to choose either asset or equity acquisitions. Asset acquisitions involve the selective purchase of a target company's assets, and equity acquisitions involve acquisitions of common stocks. We document that firms with loan covenants are more likely to engage in asset acquisitions as opposed to equity acquisitions. Our results are robust

Industry classifications are used by investors, economists, and policy makers for a great variety of purposes. The traditional economic‐activity‐based systems (Global Industry Classification Standard, North American Industry Classification System, Standard Industrial Classification, and Fama–French) have been supplemented in recent years by alternative classification systems. Our purpose is to provide

Depending on whether the existing debt is below or above target debt level, some firms are more willing to raise debt (if needed) than others. In this article, I show that firms are more likely to both increase and smooth dividends when they have below‐target debt after controlling for access to debt. Additionally, I show that when firms have below‐target debt, they use a greater fraction of proceeds

In this article, we investigate how institutional investors help mitigate business‐related risks in a corporate environment. Using a large sample of employment disputes, litigations, and court cases, we find that institutional investors play a significant role in reducing employment litigation. We observe that firms with larger shares of institutional ownership have a lower incidence of employment

We analyze limit order book resiliency following liquidity shocks initiated by large market orders. Based on a unique data set, we investigate whether high‐frequency traders are involved in replenishing the order book. Therefore, we relate the net liquidity provision of high‐frequency traders, algorithmic traders, and human traders around these market impact events to order book resiliency. Although

I examine the relation between intermarket sweep order (ISO) order imbalances and the daily returns of individual stocks. First, I show that ISO order imbalances are positively related to contemporaneous returns. Second, I find that price pressures emanating from ISO imbalances are persistent and predict cumulative abnormal returns up to 2 months. The predictive power of ISO order imbalances on contemporaneous

We examine the impact of social capital on board gender diversity among U.S. firms. We test whether trust and social networks in a county lead to an increase in female board representation. We find that firms headquartered in high‐social‐capital counties have higher diversity in their corporate board. Economically, we estimate that a 1 standard deviation (SD) increase in social capital leads to a 0

Using both marketwide and firm‐level illiquidity measures of the stock, bond, and credit default swap markets, we find that comovements of illiquidity across markets increase significantly during the recent global financial crisis. Moreover, the degree of comovement remains significantly higher in the postcrisis period and regulatory period than in the precrisis period. Specifically, the distribution

Researchers have argued that the uncertainty surrounding innovative activities causes firms to either underinvest or overinvest in research and development (R&D). We examine whether the information gained by boards through directors’ connections helps mitigate such distortions. We find that an increase in directors’ connections has an asymmetric impact on under‐ and overinvesting firms. R&D expenditures

Using panel data of U.S. firms, we focus on an important yet understudied facet of the chief executive officer's (CEO) personality—extraversion—and how it affects corporate capital structure decisions. We examine how this relation is moderated by financing (tax) benefits, financial crisis, firm size, growth opportunities, and collateralization. The results show that firms managed by extraverted CEOs

We analyze changes in lending by U.S. banks to businesses from 1994 to 2011. We find that lending to businesses, and in particular to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and did not, receive Troubled Asset Relief Program (TARP) funds from the U.S. Treasury, and find that banks receiving

We exploit a criteria change by Standard & Poor's (S&P) to examine the real effects of a credit ratings change. Using a recalibration by S&P, unrelated to firms’ fundamentals, as a quasi‐natural experiment we analyze the impact of a ratings upgrade on the issuance activity, investment, cash holdings, and payout policy of companies. Our findings suggest upgraded firms subsequently issue more debt relative

In this study, we extend the standard economic model of suicide by considering a new influential factor driving the voluntary death rate. Using an international sample, we estimate the model and document a robust and significant inverse relation between stock market returns and the percentage increase in suicide rates. Trends in male and female suicide are affected by market fluctuations, both contemporaneously

We detect jumps in a high‐frequency price series of exchange‐traded funds (ETFs) that track the broad indexes of U.S. equity markets. Although many jumps (43%) are related to macroeconomic news, more jumps (57%) are not. No‐news jumps are followed by significant return reversals for at least 60 minutes. The return dynamics after news‐related jumps vary with the news characteristics. Scheduled‐news

I examine the effect of product market competition on the yield spread of corporate bonds. I find that firms that face more competitive threats also face a higher cost of corporate bond debt. After controlling for common bond‐level, firm‐level, and macroeconomic variables, my results show that bondholders of firms that are subject to increased competition demand significantly higher credit spreads

We examine whether economic policy uncertainty (EPU) affects a board's chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as

We analyze the predictive power of several macroeconomic and financial indicators in forecasting quarterly realized betas of 30 industry and 25 size and book‐to‐market portfolios. We model realized betas as autoregressive processes of order 1 and include lagged values of macroeconomic and financial indicators as exogenous predictor variables. In out‐of‐sample forecasting exercises, forecasts using

We study sell‐side analysts’ motives to diversify their portfolios across industries. Despite the negative association between diversification and accuracy, more than 60% of analysts cover multiple industries. We argue that analysts’ choice to diversify is rooted in concerns about future job security. We find that more diversified analysts are less likely to experience job turnover and leave the profession

We define areas with strong geographic ties to powerful politicians as politically vibrant and show that they are characterized by greater value‐relevant information generation and symptomatic of equity market segmentation. Political vibrancy entails greater levels of local bias and local comovement and has two important return predictability implications. First, it enhances local institutions’ informational

We investigate whether diversification affects bank risk taking in the U.S. banking industry, and whether this relation is partially explained by agency theory. Our results show that U.S. banks with a relatively high share of noninterest income become riskier when moving toward non‐interest‐income‐generating activities, especially activities from investment banking, proprietary trading, and so on.

Using U.S. Department of Justice data on state‐level political corruption, we find that banks charge higher loan spreads (all‐in‐drawn spreads) to firms in states with higher corruption and that these effects are more pronounced for firms facing financial constraints but less pronounced for firms experiencing greater external monitoring. These results are robust to additional controls, alternative

We find that mergers and acquisitions (M&As) occurring after the 2007–2009 financial crisis were significantly more value enhancing than precrisis M&As, in both the short and long term. This superior postcrisis performance can be attributed to an increase in external financing constraints following the crisis that caused a decline in general financing availability. This decline restricted the universe

In this article we provide the optimal timing and equilibrium terms of a vertical merger with two sources of uncertainty in the production chain, namely, marginal cost of raw material and price level of final product. By eliminating monopoly power and transaction cost in the production process between upstream and downstream firms, a vertical merger can increase social welfare, which is consistent

The recent literature investigating profitability anomalies defines profitability in various ways (i.e., gross, operating, and cash based). We show that limits to arbitrage are associated with returns of gross and cash‐based operating profitability anomalies, suggesting mispricing. In contrast, returns from the operating profitability strategy have no relation with barriers to arbitrage and exhibit

In this article we explain how Islamic banks (IBs) maximize profitability in the presence of costly religiosity. Because of strong competition between IBs and conventional banks (CBs), a unique equilibrium emerges that affects the IB pricing structure. We propose a new model that identifies the optimal rate on the asset and liability sides of IBs. It shows that the financial products offered by IBs