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A Survey of Private Debt Funds Review of Corporate Finance Studies (IF 11.3) Pub Date : 2024-02-17 Joern Block, Young Soo Jang, Steven N Kaplan, Anna Schulze
Despite its large and increasing size in the United States and Europe, the private debt (PD) market, compared to the bank and syndicated loan markets, has been researched little. In this paper, we survey U.S. and European investors with private debt assets under management (AuM) of over $390 billion. These investors are primarily direct lending funds. We ask the general partners (GPs) how they source
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Activity Shocks and Corporate Liquidity: the Role of Trade Credit Review of Corporate Finance Studies (IF 11.3) Pub Date : 2024-02-12 Benjamin Bureau, Anne Duquerroy, FranceFrédéric Vinas
We show both theoretically and empirically how trade credit financing may magnify the impact of activity shocks on corporate liquidity. Using unique daily data on payment defaults on suppliers in France, we quantify the magnitude of the short-term cyclical liquidity stress induced by trade payment obligations, exploiting the COVID-19 crisis as an exogenous shock. A one-standard-deviation rise in net
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Credit Risk Sharing and Credit Market Regulation Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-12-26 Ajay Subramanian
I show how aggregate risk influences credit default swap (CDS) markets and CDS regulation in an analytically tractable general equilibrium framework. For low aggregate risk, the equilibrium with unregulated CDS markets is efficient with bondholders being fully insured. A general efficient allocation can be implemented via transfers alone. For intermediate aggregate risk, a margin requirement on CDS
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Venture Capital Investments, Merger Activity, and Competition Laws around the World Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-11-29 Gordon M Phillips, Alexei Zhdanov
We examine the relation between venture capital (VC) investments, M&A activity, and merger competition laws in 45 countries around the world. We find evidence of a strong positive association between VC investments and lagged M&A activity, consistent with an active M&A market providing viable exit opportunities for VC companies and therefore incentives for venture capitalists to invest. We also explore
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Returns to Scale from Labor Specialization: Evidence from Asset Management Mergers Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-10-18 Mancy Luo, Alberto Manconi, David Schumacher
We study human capital synergies in asset management mergers that stem from the improved ability to assign fund managers to more specialized tasks in larger firms. More specialized task assignment allows rotated managers to focus on their investment expertise and leads to incremental $54 million of value added per deal per year on average. The effects are concentrated in mergers that lead to a large
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How Does Policy Uncertainty Affect Venture Capital? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-09-20 Xuan Tian, Yichu Wang, Kailei Ye
This paper examines the effect of policy uncertainty on venture capital (VC) investment. Relying on plausibly exogenous variation in policy uncertainty caused by closely contested U.S. gubernatorial elections, we find that policy uncertainty negatively affects VC investment. The effect is more pronounced if VC investment is subject to higher illiquidity. However, some distinctive features of VCs (strategic
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Funding Contagion through Common Owners Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-08-12 Borja Larrain, Giorgo Sertsios, Francisco Urzúa I
Funding contagion is the impaired ability of a firm to raise external funds when negative shocks hit other firms under the same owner. We study this possibility with pairs of private firms in unrelated industries that share a large common shareholder. We find that a firm’s debt growth and financial leverage go down when the partner firm experiences negative shocks. Our results are consistent with creditors
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Cash Is King: The Role of Financial Infrastructure in Digital Adoption Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-08-10 Bhavya Agarwal, Nirupama Kulkarni, S K Ritadhi
This paper examines whether a one-time, extensive, but temporary shock to cash supply can affect the adoption of digital payments. We exploit the 2016 demonetization episode in India, which overnight discontinued 86% of cash in circulation. Using novel administrative data from retail debit card transactions, we identify a 12% increase in digital payments in areas adversely affected by the cash shortage
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Determinants of the Intensity of Bank-Firm Relationships: Evidence from Japan Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-07-29 Yasuharu Aoki
Focusing on the Japanese setting, this study investigates the standard firm characteristics that affect the intensity of bank-firm relationships (IBR) and how these characteristics relate to the decline in IBR. The regression results show that firm size, credit quality, investment opportunities, and ownership concentration are negatively associated with IBR, while firm age, pledgeability, and managerial
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Solving Serial Acquirer Puzzles Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-07-17 Antonio J Macias, P Raghavendra Rau, Aris Stouraitis
Using a novel typology of serial acquirers, we examine several puzzles documented in the prior literature. We show that acquisitions by different types of acquirers are driven by different factors, they acquire different sizes of targets, and subsequent acquisitions by acquirers are predictable ex ante. Controlling for market anticipation, the most frequent serial acquirers do not earn declining returns
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Quasi-Insider Shareholder Activism: Corporate Governance at the Periphery of Control Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-07-14 Jonathan Cohn, Mitch Towner, Aazam Virani
We analyze shareholder activism by “quasi-insiders”: founders, former executives, and other individuals tangentially connected to a firm. These individuals seek control in their campaigns, use aggressive tactics, and target smaller, poorly performing firms. Their campaigns are associated with positive announcement returns. Former CEOs who engage in campaigns often depart from the target under negative
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FinTech, Investor Sophistication, and Financial Portfolio Choices Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-06-08 Leonardo Gambacorta, Romina Gambacorta, Roxana Mihet
This paper analyzes the links between advances in financial technology, investors’ sophistication, and the composition and returns of their financial portfolios. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed microdata from Banca d’Italia, we test these predictions for Italian households over the period 2004-2020. In general
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Can Banks Save Mountains? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-05-24 David Haushalter, Joseph J Henry, Peter Iliev
We study bank policies to limit lending to companies engaged in mountaintop removal (MTR) coal mining, a form of coal extraction that has raised many environmental concerns. Using the staggered introduction of these policies, we document that these policies did not lead to meaningful changes in average bank lending or MTR mining. However, larger banks, banks that are under media pressure, and banks
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ESG-Linked Compensation, CEO Skills, and Shareholder Welfare Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-05-15 Swarnodeep Homroy, Taylan Mavruk, Van Diem Nguyen
Executive compensation is increasingly being linked to ESG outcomes. This paper examines whether ESG targets are consistent with shareholder welfare. Using granular information on compensation contracts of Swedish CEOs, we show that ESG and financial targets are competing. ESG-linked compensation is 5 percentage points more common in well-governed firms and 6.3 percentage points more likely for CEOs
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Greening the Swiss National Bank’s Portfolio Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-05-03 Rüdiger Fahlenbrach, Eric Jondeau
Central banks are increasingly concerned about climate-related risks and want to ensure that the financial system is resilient to them. As they integrate these risks into financial stability monitoring, they also discuss how to apply environmental criteria to their own policy portfolio management, without compromising their policy mandate. We describe different strategies and assess their relevance
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Creditor-Control Rights and the Nonsynchronicity of Global CDS Markets Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-04-13 Iftekhar Hasan, Miriam Marra, Eliza Wu, Gaiyan Zhang
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity
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Corporate Investment and Financing Dynamics Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-04-13 Dirk Hackbarth, Dongming Sun
We consider the behavior of leverage ratios in a trade-off model with investment. Debt underutilization to retain financial flexibility persists even when firms exercise their last investment options, and it is more (less) severe for more back-loaded (front-loaded) investment opportunities. Leverage paths crucially hinge on the structure of the investment process, which leads firms to have significantly
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Do Managers Do Good with Other People’s Money? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-04-06 Ing-Haw Cheng, Harrison Hong, Kelly Shue
There is mixed evidence on whether the marginal dollar spent on corporate social responsibility is due to agency problems. We propose an approach by modeling how the 2003 dividend tax cut, which increased after-tax insider ownership and better aligned managerial and shareholder interests, affected the marginal dollar spent on firm responsibility. We confirm key predictions of our agency model: following
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Do Short Sellers Affect Corporate Innovation? Evidence from a Policy Experiment Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-03-27 Jie (Jack) He, Xiao (Shaun) Ren, Xuan Tian
We examine the effect of short sellers on corporate innovation. To establish causality, we use a policy experiment that exogenously removes the short-selling constraint for a randomly selected subsample of Russell 3000 firms. We find that innovation quality, value, and efficiency of treatment firms improve significantly more than do control firms surrounding the policy shock. The exposure to patenting-related
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Can Central Banks Boost Corporate Investment? Evidence from ECB Liquidity Injections Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-03-20 Stine Louise von Rüden, Marti G Subrahmanyam, Dragon Yongjun Tang, Sarah Qian Wang
Liquidity injections by central banks have become frequent and massive, but their real effects on corporate investment remain unclear. We examine the longer-term refinancing operations (LTROs) of the European Central Bank (ECB) during the euro-zone sovereign crisis and show that greater LTRO funding to banks is associated with lower corporate investment. Riskier banks received funds through the LTROs
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Racial Concordance in the Market for Financial Advice Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-02-23 Christopher P Clifford, William C Gerken, Tian Qiu
We examine the role of race and racial concordance between financial advisors and their local community. We document significant differences in stock market participation based on community racial composition, as well as differences in the characteristics of communities served by minority advisors. Notably, minority advisors are more likely to serve racially concordant communities, which tend to be
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Deposit Insurance Premiums and Bank Risk Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-02-14 Edward T Kim, Marcelo Rezende
Deposit insurance premiums impose costs on banks' balance sheets, narrowing profit margins and inducing banks to “search for yield”. This paper estimates the effects of deposit insurance premiums on bank portfolio rebalancing using supervisory data and a kink in the insurance premium schedule. We show that deposit insurance premiums weaken banks' demand for reserves (a liquid asset with no credit risk)
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How Does Corporate Governance Affect Equity Volatility? Worldwide Evidence and Theory Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-02-08 Louis Gagnon, Alexandre Jeanneret
We investigate the causal impact of corporate governance on equity volatility in a quasi-natural experimental setting by exploiting the staggered passage of governance reforms in the past 25 years. Using a sample of 33,831 firms from 48 countries, we find that equity volatility drops by one-fifth following the passage of reforms that increase board independence. This effect is driven by an adjustment
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Clawback Provisions and Firm Risk Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-02-01 Ilona Babenko, Benjamin Bennett, John M Bizjak, Jeffrey L Coles, Jason J Sandvik
Many of the events that trigger clawback provisions are associated with risky corporate policies and variable performance outcomes. We propose and test the hypothesis that clawback provisions motivate managers to reduce firm risk. Panel ordinary least squares, general method of moments with instrumental variables, and propensity square matching models all indicate that clawback provisions decrease
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Competing for Deal Flow in Local Mortgage Markets Review of Corporate Finance Studies (IF 11.3) Pub Date : 2023-01-08 Darren J Aiello, Mark J Garmaise, Gabriel Natividad
The U.S. mortgage market exhibits competitive instability in which some lenders rapidly emerge from the fringe to substantial market shares. Using inferred discontinuities in application acceptance models to generate local lending shocks, we analyze the impact on a lender of a surge in originations by its competitors. We show that the quickest-growing (but not the largest) competitors divert applications
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Bank Lobbying as a Financial Safety Net: Evidence from the Postcrisis U.S. Banking Sector Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-12-19 Kentaro Asai
I argue creditors, plausibly considering the link between bank lobbying and government bailouts, reflect the financial-safety-net aspect of bank lobbying. My structural estimation based on U.S. data suggests bank lobbying is negatively associated with the occurrence of a run-like equilibrium when a bank is subject to multiple equilibria. The estimated effect on bank risk and value is economically significant
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Firm Finances and the Spread of COVID-19: Evidence from Nursing Homes Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-12-02 Taylor A Begley, Daniel Weagley
We find that firms’ financial resources play an important role in mitigating the spread of COVID-19. We study nursing homes—whose residents account for over one-third of all U.S. COVID-19 deaths—at a time when investment in risk mitigation was costly and critical. Facilities with less liquidity and those experiencing more severe cash flow shocks had more cases of COVID-19. The importance of cash flow
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Deregulating Innovation Capital: The Effects of the JOBS Act on Biotech Startups Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-12-01 Craig M Lewis, Joshua T White
We examine real outcomes for biotech startups going public around the Jumpstart Our Business Startups (JOBS) Act. Reduced compliance costs associate with greater innovation capital formation as biotech IPO volume and proceeds increase after the JOBS Act. Biotechs, which conduct over 30% of IPOs since 2012, go public with products earlier in the FDA approval process and more frequently target rare diseases
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Do Nonfinancial Firms Use Financial Assets to Take Risk? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-11-29 Zhiyao Chen, Ran Duchin
Using hand-collected data on financial asset portfolios and exploiting the 2014 oil price crisis as an exogenous cash flow shock, we investigate financial risk-taking at distressed firms. We find that distressed firms, with high debt rollover risk proxied for by short-term liabilities, substantially increase their investments in risky financial assets, including corporate debt, equity, and mortgage-backed
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Firm Listing Status, Firm Size, and the Financing of Investment Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-11-07 Mathias Lé, Frédéric Vinas
How do companies finance their investments? We examine the financing of investments according to firms’ listing status, their size, and the nature of the investments. We show that private firms rely more on bank credit than public firms and less on financial debt, equity, and cash flow. We also show that the contribution of financial debt and equity increases with firm size. Considering both dimensions
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Credit Environment and Small Business Dynamics: Evidence from Establishment-Level Data Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-11-01 Chen Lin, Mingzhu Tai, Wensi Xie
We evaluate how a positive, technology-driven shock to bank liquidity affects small business dynamics across different size distributions. We first show that banks receiving positive liquidity shocks increase lending to relatively larger SMEs, not to the smallest firms. This finding is consistent with the view that a positive liquidity shock enhances bank charter values, thereby reducing risk-taking
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Credit Supply Shocks: Financing Real Growth or Takeovers? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-10-13 Tobias Berg, Daniel Streitz, Michael Wedow
How do firms invest when financial constraints are relaxed? We document that firms affected by a large positive credit supply shock predominantly increase borrowing for transaction-based purposes. These treated firms have larger asset and employment growth rates; however, growth entirely stems from the increased takeover activity. Announcement returns indicate a low quality of the credit-supply-induced
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Regulatory Spillovers in Local Mortgage Markets Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-10-10 Ivan Lim, Duc Duy Nguyen, Linh Nguyen
We document novel evidence on the spillover effect of a corporate control regulation on local mortgage markets. We find that banks directly targeted by the Sarbanes-Oxley Act (SOX) to rectify their internal control weaknesses reduce mortgage originations following the regulation’s enactment. This causes mortgage credit to be reallocated toward other banks in the same local markets: while competing
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Capital Structure and the Yield Curve Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-10-06 Diogo Duarte, Özde Öztekin, Yuri F Saporito
We develop a dynamic capital structure model in which interest rates are stochastic and driven by three state variables: level, slope, and curvature of the yield curve in an arbitrage-free Nelson-Siegel model. Our analysis suggests that the yield-curve factors are critical determinants of the capital structure of firms and that an increase in any of the three factors is followed by an increase of the
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Price Uncertainty and Debt Covenants: Evidence from U.S. Oil Producers Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-09-27 Sandrine Docgne, Diogo Duarte
We use an exogenous, forward-looking measure of price uncertainty to examine the effect of uncertainty on the use of covenants in private and public debt contracts. The effect of uncertainty differs significantly in loans versus bonds, suggesting that private and public lenders face different incentives when contracting under high uncertainty. In loans, uncertainty increases the use of performance-based
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Energy Transitions and Household Finance: Evidence from U.S. Coal Mining Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-09-16 Ding Du, Stephen A Karolyi
Between 2010 and 2020, the U.S. coal industry experienced a 50% drop in production, employment, and active mines, driven by regulatory factors and technological innovation in alternative energy sources. We study the impact of this energy transition on household employment, wages, migration, and home ownership in affected communities. Compared to non-coal-producing, resource-rich counties, coal-producing
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When Does Higher Firm Leverage Lead to Higher Employee Pay? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-09-10 Timothy E Dore, Rebecca Zarutskie
We show that newly hired workers earn higher wages in response to higher firm leverage. Consistent with compensating differential models, these higher wages appear to reflect compensation for the risk of earnings losses in the event of financial distress. For tenured workers, increases in leverage are not associated with higher wages. Our findings suggest that the wage costs of debt and optimal capital
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Board Reforms, Stock Liquidity, and Stock Market Development Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-09-06 Buhui Qiu, Thomas To
This paper studies the effect of board reforms on stock liquidity using data from 37 countries. We document that board reforms significantly increase stock liquidity: the effective spread on average decreases by 12.7% after a board reform. As information asymmetry is a key determinant of stock liquidity, we further find that board reforms decrease information asymmetry, and the treatment effect of
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How Do Investors and Firms React to a Large, Unexpected Currency Appreciation Shock? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-23 Matthias Efing, Rüdiger Fahlenbrach, Christoph Herpfer, Philipp Krueger
Past research has suggested that firms can significantly reduce their exposure to moderate exchange rate fluctuations by means of pass-through and hedging. Studying the appreciation of the Swiss franc by 17% on January 15, 2015, we show that firms remain exposed to extreme currency events. Pass-through, a way to share the costs of exchange rate risk with foreign customers, fails after extreme exchange
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Equity Issuance Methods and Dilution Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-22 Mike Burkart, Hongda Zhong
We analyze rights and public offerings when informed shareholders strategically choose to subscribe. Absent wealth constraints, rights offerings achieve the full information outcome and dominate public offerings. When some shareholders are wealth constrained, rights offerings lead to more dilution of their stakes and lower payoffs, despite the income from selling these rights. In both rights and public
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Managerial Entrenchment and the Market for Talent Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-19 Fabio Feriozzi
This paper studies how the nature of managerial skills affects firms’ governance decisions. As required skills shift from firm specific toward more general abilities, replacing an underperforming CEO with an outside hire becomes more profitable for shareholders. Therefore, firms adopt stronger governance arrangements to limit the entrenchment of incumbent CEOs and exploit the improved opportunities
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Delegated Investment Management in Alternative Assets Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-16 Aleksandar Andonov
Institutional investors can be segmented into investors that hold simple portfolios of traditional equities and bonds, and investors that manage complex strategies in public and private markets. Investors implementing active portfolio management and holding diversified portfolios of equities and bonds are more likely to invest in alternative asset classes. The performance of institutional investors
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COVID-19 and Corporate Finance Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-13 Marco Pagano, Josef Zechner
We distill evidence about the effects of COVID-19 on companies. Stock price reactions to the shock differed greatly across firms, depending on their resilience to social distancing, financial flexibility, and corporate culture. The same characteristics affected the response of firms’ sales, employment, and asset growth. Despite the shock, firms expanded their balance sheets and liquidity by raising
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The Life Cycle of Dual-Class Firm Valuation Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-08-12 Martijn Cremers, Beni Lauterbach, Anete Pajuste
We examine U.S. dual- and single-class firms from 1980 to 2019 and document their valuation differences over their corporate life cycle. At the IPO, dual-class firms have higher mean valuations than do single-class firms, and some evidence indicates that this premium may emanate from dual-class firm founders’ unique vision and leadership skills. As firms age, the valuation premium of dual-class firms
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A Closer Look at the Effects of Equity Market Liberalization in Emerging Markets Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-06-24 R David McLean, Jeffrey Pontiff, Mengxin Zhao
Earlier studies have linked equity market liberalization to growth in emerging markets. Some conclude liberalization causes growth, whereas others contend contemporaneous economic policies and conditions play important roles. The causal argument contends that foreigner investability in public firms leads to lower discount rates and greater share issuance, investment, and efficiency. Using three separate
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Do Security Analysts Discipline Credit Rating Agencies? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-05-19 Kingsley Fong, Harrison Hong, Marcin Kacperczyk, Jeffrey D Kubik
Credit ratings of corporations are biased, but the forces driving this bias are unclear. We argue it would be difficult for rating agencies to issue high grades for a firm’s debt when there are a lot of objective equity analyst reports about the firm’s earnings that are informative about its default. We find that an exogenous drop in analyst coverage leads to greater optimism-bias in ratings, especially
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Understanding Bank Payouts during the Crisis of 2007–2009 Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-05-02 Peter Cziraki, Christian Laux, Gyongyi Loranth
We study U.S. banks’ payout policy in 2007–2008. We benchmark these payouts against payouts before the crisis, measure stock price reactions to announcements of dividend changes, and analyze changes in the relation between payout growth and future performance. Further, we examine cross-sectional variation in banks’ payout policy to gauge the possible motives underlying banks’ payout decisions in 2007–2008
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Agency Conflicts and Investment: Evidence from a Structural Estimation Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-04-27 Redouane Elkahmi, Daniel Kim, Chanik Jo, Marco Salerno
We develop a dynamic capital structure model to study how agency conflicts between managers and shareholders affect the joint determination of financing and investment decisions. We show that there are two agency conflicts with opposing effects on a manager’s choice of investment: first, the consumption of private benefits channel leads managers not only to choose a lower optimal leverage, but also
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Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households? Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-04-23 Ashleigh Eldemire,Kimberly F Luchtenberg,Matthew M Wynter
Abstract We use the U.S. Department of Housing and Urban Development’s Housing Choice Voucher program as a setting to evaluate the interaction of homeownership and race on the wealth accumulation of low-income households. Using a within-treatment difference-in-differences framework, we establish that low-income households that receive assistance in owning a home experience increased wealth accumulation
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Social Change through Financial Innovation: Evidence from Donor-Advised Funds Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-04-23 Jillian Grennan
Abstract I draw on new data to examine how donor-advised funds (DAFs), a fast-growing philanthropic option, relate to social progress. DAFs are distinguished by flexibility such as their ability to transform complex assets and separate the timing of tax breaks from giving decisions. While DAFs are often classified by their sponsor type, I introduce a new classification scheme that reflects their economic
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The Burden of National Debt: Evidence from Mergers and Acquisitions Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-04-21 Ruchith Dissanayake, Yanhui Wu, Huizhong Zhang
Increases in government debt are associated with a reduction in the yield spread between high-grade corporate bonds and long-term Treasuries and an increase in fiscal uncertainty. Consequently, increases in government debt significantly reduce the firm’s likelihood of acquisition. The effect is stronger among firms whose debt is a closer substitute for Treasuries and firms with greater exposure to
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Determinants of LGBTQ+ Corporate Policies Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-04-07 Tanja Artiga González, Paul Calluzzo, G Nathan Dong, Georg D Granic
We study the determinants of firms’ LGBTQ+ policies and their relation to general CSR policies. Common factors explain LGBTQ+ policies related to firms’ primary stakeholders and those aimed at public LGBTQ+ efforts: younger firms, those with more financial resources, more educated workforces, catering to retail customers, and located in liberal areas have more LGBTQ+-friendly policies. LGBTQ+ initiatives
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What’s Good for Women Is Good for Science: Evidence from the American Finance Association Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-03-22 Renee Adams, Michelle Lowry
Motivated by evidence that the largest gender differences in career outcomes arise within occupations, we examine a single occupation. With the support of the American Finance Association (AFA), we surveyed AFA members on the professional culture within finance. Individual experiences vary substantially, especially across men and women. Contrary to conventional narratives, differences in preferences
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The Disparate Effect of Nudges on Minority Groups Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-03-13 Maya Haran Rosen, Orly Sade
We compare the effect of a text message sent to mobile phones on the actions of minority groups versus the general population in Israel. Using proprietary data from a dedicated survey, we show that the text message had an overall positive effect, but a significantly smaller effect on minority groups. We provide insights into potential channels (low digital literacy, low financial literacy, and low
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Passivity on the Board of Directors Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-03-12 Chris Yung
A CEO proposes a strategic plan to a board of directors acting in an advisory role. Each director supports the plan, opposes it, or delays speaking until other directors act. The option to delay suppresses dissent from bad plans in equilibrium. Delay has a pronounced impact for important decisions and for firms with reputable CEOs who make few errors. I investigate the role of ordering, that is, when
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Agency Costs and Strategic Speculation in the U.S. Stock Market Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-03-03 Paolo Pasquariello
This study investigates the notion that agency-driven information asymmetry may affect a firm’s stock liquidity. I postulate that less uncertainty about managerial agency problems may enhance liquidity provision by lowering dealers’ perceived adverse selection risk from trading with better-informed speculators. Consistent with my conjecture, I find that the staggered adoption of antitakeover provisions
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Economic Significance in Corporate Finance Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-02-17 Todd Mitton
Reporting the economic significance of findings in corporate finance has become increasingly common, but a review of the literature reveals shortcomings in typical reporting practices. Researchers can more effectively communicate the practical importance of findings by using standard measures of economic significance scaled by the standard deviation of the dependent variable, by providing all statistics
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Hidden Performance: Salary History Bans and the Gender Pay Gap Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-02-10 Jesse Davis, Paige Ouimet, Xinxin Wang
As of 2019, salary history bans were enacted by 17 states and Puerto Rico with the stated purpose of reducing the gender pay gap. We argue that salary history bans may negatively affect wages as employers lose an informative signal of worker productivity. We empirically evaluate these laws using a large panel dataset of disaggregated wages covering all public-sector employees in 36 states and find
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Do Ex-Bankers Benefit Nonfinancial Firms? Evidence from Job Transitions Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-02-04 Lucy Chernykh, Sergey Mityakov
We document the beneficial impact of human capital transfer from banks to nonfinancial firms: firms hiring ex-bankers have higher asset and employment growth and easier access to bank loans. Using a unique employee-employer-matched data set from Russia and exogenous variation in ex-bankers’ supply due to bank-branch-network restructurings, we establish the causal interpretation of these patterns. We
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Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time Review of Corporate Finance Studies (IF 11.3) Pub Date : 2022-01-31 Bin Wei, Feng Zhao
This paper examines racial disparities in mortgage processing time prior to the global financial crisis. We find that Black borrowers are underrepresented and experience a longer processing time than white borrowers among the mortgages securitized by government-sponsored enterprises (GSEs). At the same time, Black borrower are overrepresented and face a similar processing time among privately securitized