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Liquidity risk and CMBX microstructure Review of Financial Economics Pub Date : 2024-01-25 Andreas D. Christopoulos, Joshua G. Barratt
This is the first paper in the literature to focus on CMBX price formation with dual techniques of liquidity estimation. In this paper, we introduce a generalizable method using principal component analysis to estimate daily risk decompositions of default, interest rate, liquidity and excess liquidity from previously simulated reduced form monthly risk decompositions. Our method generates these measures
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Credit rating agencies during credit crunch Review of Financial Economics Pub Date : 2024-01-03 Ali Ebrahim Nejad, Saeid Hoseinzade, Ali Niazi
In this paper, we study whether credit rating agencies (CRAs), as they claim, follow the rating through-the-cycle approach as opposed to a pro-cyclical approach. In particular, we compare the behavior of CRAs during the credit crunch and normal market conditions. Using the credit rating data by S&P, we find that CRAs assign lower credit ratings to firms during credit crunch relative to normal times
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Geography of firms and propagation of local economic conditions Review of Financial Economics Pub Date : 2023-09-14 Gennaro Bernile, Stefanos Delikouras, George M. Korniotis, Alok Kumar
This study shows that the geographic network of public firms facilitates the propagation of local economic conditions across the United States. We identify economic connections among U.S. states based on the 10-K listings of public firms and show that the returns and liquidity of firms headquartered in connected states exhibit excess comovement. The economic connections also generate spillover effects
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Conventional or reverse magnitude effect for negative outcomes: A matter of framing Review of Financial Economics Pub Date : 2023-09-03 Wolfgang Breuer, Can K. Soypak, Bertram I. Steininger
We present and expand existing theories about why individuals may assess positive outcomes differently from negative outcomes in intertemporal choices. All of our theories—based on utility or cost considerations – predict a conventional magnitude effect for positive outcomes, that is, a negative relation between outcome size and subjective discount rates. For negative outcomes, however, implications
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Lottery demand, lottery factor, and anomalies Review of Financial Economics Pub Date : 2023-09-01 Turan G. Bali, Quan Wen
We provide an overview of the literature investigating (retail) investors' demand for lottery-like stocks. We summarize different sets of lottery proxies and discuss their implications for cross-sectional pricing of individual stocks. We present empirical evidence and summarize the findings including (i) the robustness of the lottery demand effect using an extended data set, (ii) the economic underpinnings
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Leverage target and R&D spending Review of Financial Economics Pub Date : 2023-08-23 Sharier Azim Khan
In this paper, I examine how capital structure (relative to target) affects the financing of R&D spending. Studies on capital structure have shown that firms adjust their debt levels toward target debt levels. I show that firms with below-target debt are more likely to issue debt to finance R&D spending compared to firms that have above-target debt. The results are stronger for firms that are smaller
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Stakeholder orientation and product market performance: Evidence from a natural experiment Review of Financial Economics Pub Date : 2023-08-22 Juntai Lu, Jia Wei
We examine the causal effect of stakeholder orientation on firms' product market performance. Using the staggered enactment of constituency statutes across different states as an exogenous shock that increases the extent of the stakeholder orientation, difference-in-difference estimations suggest that on average firms incorporated in states that adopted constituency statutes increase sales growth by
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Identifying overvalued equity Review of Financial Economics Pub Date : 2023-07-06 Messod D. Beneish, David Craig Nichols
We develop a profile of overvalued equity, and show that firms meeting this profile experience abnormal stock returns net of transaction costs of −22% to −25% over the 12 months following portfolio formation. We show our model is distinct from predictors proposed in prior work, and our results robust to alternative measurements of expected returns. We also show that overvaluation is not confined to
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Value investing via Bayesian inference Review of Financial Economics Pub Date : 2023-07-06 Bernd Huefner, Marcel Rueenaufer, Martin Boesch
Classic value investing à la Graham & Dodd (Security analysis: The classic, McGrawHill, New York, 1934) focuses on selecting stocks that seem cheap relative to their intrinsic value and fundamental quality. We use Bayesian inference to account for a large amount of uncertainty within intrinsic value estimation. We find that an undervalued-minus-overvalued factor that invests in cheap quality stocks
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Mean-reversion risk and the random walk hypothesis Review of Financial Economics Pub Date : 2023-07-06 C. Kenneth Jones
The nature of risk and long-term returns is not fully understood. There is need for a measure of long-term risk at multiple horizons. Frequency domain digital signal processing, with an additive noise model, tests the random walk hypothesis for individual firm total and idiosyncratic risk at 2-month to 4-year periods. All firms have significant 12-month risk. Monthly effects influence small firms.
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Night trading: Lower risk but higher returns? Review of Financial Economics Pub Date : 2023-07-06 Marie-Eve Lachance
This paper demonstrates that overnight returns are subject to highly persistent biases and examines the profitability of overnight-only investments in that context. Overnight returns tend to exceed their intraday counterparts, and the paper first reconciles these patterns by introducing a model that factors in systematic biases. This model identifies one-fifth of stocks as having positive and statistically
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Illiquidity and the cost of equity capital: Evidence from actual estimates of capital cost for U.S. data Review of Financial Economics Pub Date : 2023-07-06 Amit Goyal, Avanidhar Subrahmanyam, Bhaskaran Swaminathan
Illiquidity measures appear to be related to monthly realized returns but do they impact long-run costs of capital (CoC) for firms? Using U.S. data, we find cross-sectional evidence that, controlling for market capitalization, the Amihud (2002, Journal of Financial Markets, 5, 31) measure of illiquidity is negatively related to CoC estimates. A difference-in-differences analysis around exogenous brokerage
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How do leveraged buyouts affect industry peers? Analysis of the information and the competition channels Review of Financial Economics Pub Date : 2023-06-27 Manuel C. Kathan, Tereza Tykvová
Our paper provides a contribution to the literature on peer effects in leveraged buyouts and delivers an explanation for the seemingly contradicting findings in the existing literature. We find that the average peer announcement CAR amounts to −1.98%. A buyout may reveal private information about peer value and can also change in the competition within the buyout target industry. Our identification
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The effects of foreign bank presence on financial development in Africa: The role of institutional quality Review of Financial Economics Pub Date : 2023-05-10 Khadijah Iddrisu, Joshua Yindenaba Abor, Kannyiri T. Banyen
Despite the momentous rise in concentration and market share of foreign banks in overall bank assets in Africa, rigorous empirical work(s) examining their effect on financial sector development in Africa is hard to find. In view of this, the study seeks to investigate the moderating role of institutions/governance on the foreign bank presence-financial development nexus. Employing the two-step system
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Trust rhetoric and CEO gender Review of Financial Economics Pub Date : 2023-04-05 Wolfgang Breuer, Andreas Knetsch, Astrid Juliane Salzmann
This study investigates the perceived and actual trustworthiness of female managers when using rhetoric to advertise their trustworthiness in public disclosure documents. We find that the stock market reacts more favorably to trust rhetoric if the document has been prepared under the responsibility of a female CEO rather than a male CEO. We rule out that this result could be driven by female and male
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Small business administration loans, economic development, and state-level employment Review of Financial Economics Pub Date : 2023-03-30 Paul E. Orzechowski
This study analyzes the relationship between the US Small Business Administration (SBA) loan programs and state-level employment by utilizing a dynamic first-difference generalized method of moments fixed effects statistical approach using annual data from 1996 to 2013. The US state-level panel data show a positive relationship between growth rates in SBA lending per capita and states' civilian employment
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On the time-varying relationship between coskewness and returns of banks Review of Financial Economics Pub Date : 2023-03-29 Silvia Bressan, Alex Weissensteiner
For a sample of US commercial banks, we find that during the Global Financial Crisis of 2007–2009 and the COVID-19 pandemic of February–December 2020, bank returns were positively related to their coskewness with the market return, while the relationship was negative during stable periods. The literature on non-financial firms and global equity indices has shown that the relationship between coskewness
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Forecasting liquidity-adjusted VaR: A conditional EVT-copula approach Review of Financial Economics Pub Date : 2022-11-04 Madhusudan Karmakar, Ravi Khadotra
This study models the joint distribution of individual stock returns and bid-ask spreads using combined EGARCH-EVT and combined GP-INGARCH-EVT processes for the marginals, and bivariate copulas for the dependence structure. We use the proposed approach to first simulate returns and spreads of individual stocks from different countries and regions, and then forecast the Liquidity-adjusted Value-at-Risk
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Equity closed-end fund discounts and taxes Review of Financial Economics Pub Date : 2022-10-17 Shishir Paudel, Sabatino (Dino) Silveri, Mark Wu
After documenting CRSP errors in classifying the tax status of distributions, we make use of two important institutional features that the related literature has ignored: (i) tax rate changes and (ii) non-taxable distributions. We find that taxable distributions lead to discount reductions, and the reduction is greater during high tax periods than during low tax periods. By contrast, non-taxable distributions
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Do married CEOs Foster more efficient innovation? Review of Financial Economics Pub Date : 2022-10-07 Chanho Cho, Timothy Mooney, Daewoung Choi, M. Tony Via
We examine the impact of CEO marital status on firm innovative efficiency. We find that firms led by married CEOs produce 8% more patents and citations per unit of investment and generate more explorative patents. Married CEOs create a culture of tolerance among their employees that is conducive to risk taking, and their firms produce more efficient innovation (1) in regions that value social capital
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Industry tournament incentives and differential risk taking Review of Financial Economics Pub Date : 2022-08-21 Hussein Abdoh
This study examines how industry tournament incentives affect chief executive officers' (CEOs') attitudes toward differential risk-taking. The results show that these incentives cause a greater increase in taking systematic rather than idiosyncratic risks. Furthermore, this differential risk-taking manifests in a competitive business environment. The findings hold robust to the instrumental variable
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Homemade equity offerings via dividend reinvestment and stock purchase plans Review of Financial Economics Pub Date : 2022-07-29 Shaun Bond, Yu-Jou Pai, Suyan Zheng
This paper investigates equity issuances through dividend reinvestment and stock purchase plans (DRSPPs). Using a unique sample collected from security registration filings, we show that firms can issue new shares through DRSPPs without using underwriters and consequently, save a large part of direct costs. This economical form of equity offering helps high dividend paying firms retain a substantial
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Bibliometric and Scientometric analysis on CSR practices in the banking sector Review of Financial Economics Pub Date : 2022-07-23 M. Kabir Hassan, Mustafa Raza Rabbani, Jennifer Brodmann, Abu Bashar, Himani Grewal
This paper provides a bibliometric and Scientometric analysis of the corporate social responsibility (CSR) in banking sector. Our study analyzes 551 articles from the Scopus database to find out the relationship between CSR and banking. A bibliometric method was used to visualize the results using R-studio and VOS viewer software. The Scientometric analysis was conducted to determine the findings and
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Betting against sentiment? Seemingly unrelated anomalies and the low-risk effect Review of Financial Economics Pub Date : 2022-07-23 Maik Dierkes, Sebastian Schroen
The negative CAPM alphas of high-beta and high-variance stocks are attributable to an unaccounted factor in the CAPM. We use eight seemingly unrelated anomalies to construct a composite factor in the spirit of the optimal orthogonal portfolio (FOP). Accounting for FOP re-establishes a positive relation between beta and average returns in time series regressions as well as cross-sectional and explains
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Effect of COVID-19 on the performance of Islamic and conventional GCC banks Review of Financial Economics Pub Date : 2022-07-11 Yomna Abdulla, Yousif Ebrahim
This paper investigates the effects of the COVID-19 crisis on the performance of 49 listed banks in the Gulf Cooperation Council (GCC) countries, during the period from the first quarter of 2017 through the third quarter of 2020. The findings reveal that GCC banks were negatively affected by the pandemic. However, Islamic banks have performed better than conventional banks. The results also show that
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Are Islamic investments still safe assets during the COVID-19 pandemic? Review of Financial Economics Pub Date : 2022-07-11 Ashraf Khan, Stefano Piserà, Laura Chiaramonte, Alberto Dreassi, Andrea Paltrinieri
While looking for safe-haven assets, the literature obtained mixed and varying results, changing from one period to the next, or one geographical area to another. Recently, this field of research grew even more, motivated by the changing environment resulting from the global financial crisis and the current COVID-19 pandemic. We compare five Islamic and five conventional leading financial indexes for
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The co-movements of faith-based cryptocurrencies in periods of pandemics Review of Financial Economics Pub Date : 2022-07-11 Emna Mnif, Khaireddine Mouakhar, Anis Jarboui
In the recent coronavirus pandemic, several researchers have focused on the drivers of cryptocurrency behavior. In particular, this study provides insights into what can drive Islamic cryptocurrency markets and how do they react during the COVID-19 pandemic. We explore the cryptocurrency volatility and the connectedness between the Islamic, conventional, and COVID-19 confirmed cases and deaths using
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How COVID-19 pandemic, global risk factors, and oil prices affect Islamic bonds (Sukuk) prices? New insights from time-frequency analysis Review of Financial Economics Pub Date : 2022-07-11 Nader Naifar, Aviral Kumar Tiwari, Mohammed Alhashim
This paper studies the time–frequency co-movement among Islamic bond (Sukuk) prices, the recent spread of COVID-19, oil prices, economic policy uncertainty, global financial uncertainty, and global financial distress. The Dow Jones Sukuk Index (hereafter DJSI) is used as a proxy of the global Sukuk market. The Malaysian Sovereign Sukuk index is also used for comparison purposes because Malaysia maintains
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Revisiting the ICAPM under the distortion of risk–return tradeoff in short-horizon stock returns Review of Financial Economics Pub Date : 2022-06-21 Surya Chelikani, Kiseok Nam, Xuewu Wesley Wang
We suggest that the distortion of the positive risk–return relation in the ICAPM is a consequence of trading by informed investors to exploit mispricing. We hypothesize and demonstrate that a non-positive (strongly positive) risk–return relation following positive (negative) market returns is attributed to short-selling (purchasing) of overpriced (underpriced) stocks along with optimistic (pessimistic)
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Stock liquidity and director compensation Review of Financial Economics Pub Date : 2022-06-14 Tirimba Obonyo
This study investigates how stock liquidity affects the compensation incentives faced by the directors on the board. The results show that the proportion of cash-based compensation in the directors' compensation package increases when the firm's shares are less liquid: a one standard deviation increase in the bid-ask spread from the mean is associated with a 3% larger fraction of cash in the directors'
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The competitive effects of IPOs on industry rivals Review of Financial Economics Pub Date : 2022-04-05 Joseph J. Henry
I study the impact of initial public offerings (IPOs) on industry rival performance. Instrumenting for IPO completion with post-IPO filing NASDAQ returns, I find no impact of IPOs on average rival sales growth, return on sales (ROS), or Tobin’s q after 3 years. However, post-IPO rival performance varies with rival financial constraints. Relative to peers, rivals with low cash or high leverage exhibit
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Insider stock pledging and stock price informativeness: Evidence from India Review of Financial Economics Pub Date : 2022-03-14 Amanjot Singh
Insiders’ shares can act as collateral while raising funds from lenders. This study examines the impact of insiders’ stock pledging activities on stock price informativeness using a sample of 1835 Indian firms. Our findings report that insider stock pledging increases the informational efficiency of stock prices. This informational efficiency increases for larger firms with: (1) financial constraints
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Are gold, USD, and Bitcoin hedge or safe haven against stock? The implication for risk management Review of Financial Economics Pub Date : 2022-02-22 Udayan Sharma, Madhusudan Karmakar
This study investigates whether gold, USD, and Bitcoin are hedge and safe haven assets against stock and if they are useful in diversifying downside risk for international stock markets. We propose a combined GO-GARCH-EVT-copula approach to examine the hedge and safe haven properties of gold, USD, and Bitcoin. We then examine the attractiveness of these assets in reducing stock portfolio risk by using
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Fraternal twins—Should investors be careful?* Review of Financial Economics Pub Date : 2022-02-16 Martin Rohleder, Hendrik Tentesch, Rene Weh, Marco Wilkens
After analyzing portfolio differences between separate account-mutual fund twins, we find that dissimilar “fraternal twins” show significantly lower joint performance than “identical twins.” This finding is consistent with fraternal twins competing for the limited attention of a manager while identical twins mutually profit. Furthermore, the effect is stronger for separate accounts, which is probably
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Public corruption and the allocation of government contracts Review of Financial Economics Pub Date : 2021-12-08 Zuobao Wei, Yicheng Zhu
Public corruption in the government procurement process is rampant and its cost is huge, even among developed countries. Some scholars estimate that about 20%–30% of the values of government projects are lost due to public corruption. In this paper, we examine how public corruption impacts the allocation of U.S. federal contracts. Using the U.S. Department of Justice corruption convictions data and
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Credit enhancement mechanism in loan securitization and its implication to systemic risk Review of Financial Economics Pub Date : 2021-12-06 Katerina Ivanov
Using US BHC data for the period from 2004 to 2016, this paper examines the relationship between different forms of credit enhancement and bank contribution to systemic crashes. The findings demonstrate that the overall level of contractual retained interests and guarantees offered to own securitization structures poses a significant threat to financial system stability, although this varies for different
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A Markowitz-based alternative model: Hedging market shocks under endowment constraints* Review of Financial Economics Pub Date : 2021-11-11 Brett Martin, Adam Swanson
This paper suggests an alternative method of investing funds managed by endowments and foundations that is largely based on the work of Harry Markowitz, Arnold Zellner, and Nassim Taleb. Recognizing most endowments work around their traditional allocation of capital to bonds and stocks, this paper offers another piece of evidence that alternative methods of protection may be advantageous when their
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The declining trend in trade credit ratios: The impact of firm-specific and macro factors Review of Financial Economics Pub Date : 2021-10-28 Ranjan D’Mello, Mark Gruskin, Francesca Toscano
Despite the importance of trade credit as a source of financing, there is a significant and persistent decline in this form of short-term borrowing and lending over the 1979 to 2018 interval. The median firm's accounts receivable decreased by 52% while accounts payable ratio fell by 47%. The decline is systematic, as it is present in most industries and sub-samples of firms classified on different
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The size effect and default risk: Evidence from the Vietnamese stock market Review of Financial Economics Pub Date : 2021-10-22 Le Quy Duong, Philippe Bertrand
The literature is inconclusive on the source of the size effect. Our paper contributes to extant studies by investigating the relationship between the size premium and default risk in Vietnam, an important frontier emerging market. The debt-to-equity ratio and distance-to-default of Merton (1974, The Journal of Finance, 29, 449) are used as distress-risk proxies. Based on more than 300 listed stocks
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An examination of management responsibility in shock events on shareholders’ wealth and reputation-repair actions to rebound losses Review of Financial Economics Pub Date : 2021-10-20 Donald I. Buzinkai, Samir M. El-Gazzar
This paper investigates the impact of management responsibility in corporate shock events on shareholders' wealth and the types and frequency of repair actions taken to mitigate reputational losses. Information theory and market psychology suggest that shock events resulting from management faults signal ineffective firm management that reduces market participants' trust in a firm's operations. We
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The disposition effect and admiration seeking Review of Financial Economics Pub Date : 2021-09-09 Suchanek Max, Minh-Lý Liêu
This paper examines the relationship between the disposition effect and personality traits and aims to find an additional explanation of this bias in a willingness to pay for admiration. We conduct a personality assessment, a stock trading game and a sealed-bid English auction for 84 individual investors. The gathered data correspond with the literature on a descriptive level; however, even though
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Duration-adjusted betas Review of Financial Economics Pub Date : 2021-08-11 Oscar Varela
This paper proposes duration-adjusted betas for the three-factor model betas that include risk associated with the firm's dividend policy. It extends Varela (Journal of Portfolio Management, 41, 2015, 122) who shows dividend policy as relevant to the stock's risk even in perfect markets, because the stock's duration is lower when cash dividends are higher. The three-factor model's betas measure the
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Government support of banks and market discipline: International evidence Review of Financial Economics Pub Date : 2021-08-10 Kun-Li Lin, Tsaur-Chin Wu, Kuo-Pin Li
This study analyzes the effect of government support on market discipline in an international sample of banks rated by Moody's or Fitch. We also evaluate how a financial crisis and size shape the effect of government support on market discipline. We control for unobservable, country, and time-specific effects with a panel dataset of banks from 77 countries. Through this comprehensive dataset, we find
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Introduction to the special issue on labor and corporate finance Review of Financial Economics Pub Date : 2021-07-26 David C. Mauer
Introduction to the special issue on labor and corporate finance.
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Labor unemployment insurance and accounting conservatism Review of Financial Economics Pub Date : 2021-07-26 Yixin Liu, Huishan Wan, Yilei Zhang
We use state-level increases in unemployment insurance (UI) benefits as exogenous shocks to unemployment risk to examine its effect on accounting conservatism. Employing difference-in-differences analyses, we find an increase in accounting conservatism after UI benefit increases. Our findings support the employee perception management hypothesis, which argues that in order to mitigate labor costs associated
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Human capital cost and investment policy Review of Financial Economics Pub Date : 2021-07-26 Shuangshuang Ji, Tao-Hsien Dolly King, Xinxin Li
In this paper, we examine the link between human capital cost and investment policy. We find a significantly positive relationship between investment risk and the cost of human capital measured by average employee pay, especially when employees have strong bargaining power. We further investigate various channels through which investment risk influences human capital cost and find strong empirical
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Financial distress and the cost of labor: Evidence from a natural experiment Review of Financial Economics Pub Date : 2021-07-26 David J. Pedersen
Employees bear significant costs in bankruptcy. Theoretical models predict they will accept lower wages in the face of financial distress to avoid such costs. Using a natural experiment, I test this theory and find an exogenous increase in default risk causes a decrease in employee wages. The effect is economically meaningful: the reduction in aggregate annual wages equals 10% of the firm's earnings
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Board gender diversity and corporate labor investment efficiency Review of Financial Economics Pub Date : 2021-07-26 Xu Sun, Tianming Zhang
We investigate whether board gender diversity affects firms' labor investment efficiency. We find that more gender-diverse boards (higher representation of female directors) lead to less deviations in net hiring from the optimal level of labor investment predicted by economic fundamentals (i.e., more efficient investment in labor). The impact of board gender diversity on labor investment efficiency
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What shapes CSR performance? Evidence from the changing enforceability of non-compete agreements in the United States Review of Financial Economics Pub Date : 2021-07-26 Karel Hrazdil, Jeong-Bon Kim, Xin Li
Using a unique setting of exogenous variations in non-compete agreement (NCA) enforceability in the United States, we investigate whether companies strategically engage in corporate social responsibility (CSR) practices to retain employees. Using a difference-in-differences design, we find that an increase in the enforceability of NCAs deteriorates CSR performance. Cross-sectional tests indicate that
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CEO gender and corporate labor cost Review of Financial Economics Pub Date : 2021-07-26 Xiaohong Fan, Sailu Li, Natalia Villatoro
We examine the impact of CEO gender on firm-level average labor cost. In a sample of U.S. public firms with voluntary labor cost disclosure, we find that firms with female CEOs have significantly lower average labor cost than firms with male CEOs. This effect is robust to the use of propensity score matching approach to alleviate the impact of possible selection bias and endogeneity concerns. The results
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Case study of event risk management with options strangles and straddles Review of Financial Economics Pub Date : 2021-07-27 Clemens Kownatzki, Bluford Putnam, Arthur Yu
Event risk environments may involve an elevated probability of both volatility regime shifts and sharp, abrupt price changes, either up or down. Purely direction-oriented risk management approaches are not necessarily well-suited for these market conditions. In this exploratory case study, we look at the possibility that non-directional options strategies, such as straddles and strangles, may offer
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Measuring risk-taking and patience in financial decision making Review of Financial Economics Pub Date : 2021-07-23 Wolfgang Breuer, Thomas Renerken, Astrid Juliane Salzmann
We empirically compared the consistency among different kinds of measures for risk-taking and patience in a survey and an experiment. We evaluated how these variables relate to financial decisions, using a novel set of easy-to-apply survey questions as proxy. The main finding is that our results based on the novel survey questions describing financial behavior and on lifelike financial behavior in
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Earnings announcement saliency and option trading Review of Financial Economics Pub Date : 2021-06-29 Tom Adams, Thaddeus Neururer
The purpose of this study is to investigate option trading before earnings announcement dates as a function of report saliency. We define report saliency as the number of firms announcing earnings on the same day as an examined firm. We find that overall option trading volume is higher, option trading volume increases substantially near earnings announcement dates, and that investors trade more puts
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The propensity to save: The effect of Sarbanes–Oxley act Review of Financial Economics Pub Date : 2021-06-29 Hui Liang James, Roger Lirely
The Sarbanes–Oxley Act of 2002 (SOX) serves to increase transparency and improves the governance quality of publicly traded U.S. firms. Increased transparency reduces external financing costs, thereby decreasing the reliance on internal funds for investment. Improved governance quality mitigates managers’ opportunistic cash savings. Both of these effects are predicted to affect a firm's cash policy
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Estimating value-at-risk models for non-conventional equity market index Review of Financial Economics Pub Date : 2021-06-29 Ahmed S. Baig, Hassan A. Butt, Rizwan Khalid
In this study, we evaluate Value-at-Risk (VaR) forecasts for non-conventional (i.e., Islamic) equity markets using various time-varying volatility models. Recent evidence suggests that volatility shifts in returns cause non-normality by significantly increasing kurtosis. Consequently, we endogenously detect significant shifts in the volatility of our Islamic equity market index returns and incorporate
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Do local labor market conditions impact bank profitability? Review of Financial Economics Pub Date : 2021-04-06 Andrew Swanson, Danielle Zanzalari
This paper studies the impact of local unemployment shocks on bank profitability. Our work advances on previous studies that use national- or state-level data, as we create a bank-specific measure of local unemployment in which the bank has exposure. Using this novel measure, we determine how shocks to unemployment affect each individual bank's profitability. Our results indicate that an increase in
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Investor horizons and corporate policies under uncertainty Review of Financial Economics Pub Date : 2021-04-03 Christian Dreyer, Oliver Schulz
In this study, we examine the differences in Investment, Employment, and Share repurchase sensitivities to uncertainty between firms with varying investor horizons. We test for these effects using two macro-based uncertainty measures (Baker et al., 2016; Ahir et al., 2018). The results show that in uncertainty times, greater short-term investor ownership is associated with less investment and hiring
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Do crude oil futures still fuel portfolio performance? Review of Financial Economics Pub Date : 2021-04-03 Anja Vinzelberg, Benjamin R. Auer
Motivated by significant changes in the dynamics of crude oil markets, we revisit the question of whether crude oil futures are a valuable addition to typical stock and bond portfolios. To answer this question, we use a mean-variance framework with established heuristic and classic weighting schemes and, in addition, derive optimal asset weights based on forward-looking estimates of expected returns
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What is different about private equity-backed acquirers? Review of Financial Economics Pub Date : 2021-04-03 Benjamin Hammer, Heiko Hinrichs, Denis Schweizer
This paper investigates whether private equity (PE)-backed acquirers have a “parenting advantage” in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE-backed firms and a carefully matched control group of 6,652 non-PE-backed peers, for which we observe the entire acquisition history over a 19-year time span. Difference-in-differences estimates suggest that PE backing induces a sizeable
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The impact of CEO power and institutional discretion on CSR investment Review of Financial Economics Pub Date : 2021-04-03 Wolfgang Breuer, Manuel Hass, David Johannes Rosenbach
Based on a large international sample, we show how the decision-making power of CEOs in conjunction with prevailing institutional discretion relates to corporate resources allocated toward CSR strategy. First, especially with greater institutional discretion, powerful CEOs pursue exaggerated CSR strategies aiming at reputational gains for their private benefit, while not necessarily bearing the costs