Journal Cover The Journal of Finance
  [SJR: 14.546]   [H-I: 213]   [142 followers]  Follow
    
   Hybrid Journal Hybrid journal (It can contain Open Access articles)
   ISSN (Print) 0022-1082 - ISSN (Online) 1540-6261
   Published by John Wiley and Sons Homepage  [1580 journals]
  • Retail Financial Advice: Does One Size Fit All?
    • Authors: STEPHEN FOERSTER; JUHANI T. LINNAINMAA, BRIAN T. MELZER, ALESSANDRO PREVITERO
      Abstract: Using unique data on Canadian households, we show that financial advisors exert substantial influence over their clients' asset allocation, but provide limited customization. Advisor fixed effects explain considerably more variation in portfolio risk and home bias than a broad set of investor attributes that includes risk tolerance, age, investment horizon, and financial sophistication. Advisor effects remain important even when controlling flexibly for unobserved heterogeneity through investor fixed effects. An advisor's own asset allocation strongly predicts the allocations chosen on clients' behalf. This one-size-fits-all advice does not come cheap: advised portfolios cost 2.5% per year, or 1.5% more than lifecycle funds.This article is protected by copyright. All rights reserved
      PubDate: 2017-04-12T05:18:10.780066-05:
      DOI: 10.1111/jofi.12514
       
  • Selling Failed Banks
    • Authors: JOÃO GRANJA; GREGOR MATVOS, AMIT SERU
      Abstract: The average FDIC loss to selling a failed bank is 28% of assets. We document that failed banks are predominantly sold to bidders within the same county, with similar assets business lines, when these bidders are well capitalized. Otherwise, they are acquired by less similar banks located further away. We interpret these facts within a model of auctions with budget constraints, in which poor capitalization of some potential acquirers drives a wedge between their willingness and ability to pay for failed banks. We document that this wedge drives misallocation, and partially explains the FDIC losses from failed bank sales.This article is protected by copyright. All rights reserved
      PubDate: 2017-04-06T10:28:32.215625-05:
      DOI: 10.1111/jofi.12512
       
  • Volatility-Managed Portfolios
    • Authors: ALAN MOREIRA; TYLER MUIR
      Abstract: Managed portfolios that take less risk when volatility is high produce large alphas, increase Sharpe ratios, and produce large utility gains for mean-variance investors. We document this for the market, value, momentum, profitability, return on equity, investment, and betting-against-beta factors, as well as the currency carry trade. Volatility timing increases Sharpe ratios because changes in volatility are not offset by proportional changes in expected returns. Our strategy is contrary to conventional wisdom because it takes relatively less risk in recessions. This rules out typical risk-based explanations and is a challenge to structural models of time-varying expected returns.This article is protected by copyright. All rights reserved
      PubDate: 2017-04-06T07:55:42.425041-05:
      DOI: 10.1111/jofi.12513
       
  • Municipal Bond Liquidity and Default Risk
    • Authors: MICHAEL SCHWERT
      Abstract: This paper examines the pricing of municipal bonds. I use three distinct, complementary approaches to decompose municipal bond spreads into default and liquidity components, and find that default risk accounts for 74% to 84% of the average spread after adjusting for tax-exempt status. The first approach estimates the liquidity component using transaction data, the second measures the default component with credit default swap data, and the third is a quasi-natural experiment that estimates changes in default risk around pre-refunding events. The price of default risk is high given the rare incidence of municipal default and implies a high risk premium.This article is protected by copyright. All rights reserved
      PubDate: 2017-04-06T06:00:44.130537-05:
      DOI: 10.1111/jofi.12511
       
  • Financial Transaction Taxes, Market Composition, and Liquidity
    • Authors: JEAN-EDOUARD COLLIARD; PETER HOFFMANN
      Abstract: We use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on its impact. We find no support for the idea that an FTT improves market quality by affecting the composition of trading volume. Instead, our results are in line with the hypothesis that a lower trading volume reduces liquidity and in turn market quality. Consistent with theories of asset pricing under transaction costs, we document a shift in security holdings from short-term to long-term investors. Finally, we find that moderate aggregate effects on market quality can mask large adjustments made by individual agents.
      PubDate: 2017-04-06T06:00:41.327205-05:
      DOI: 10.1111/jofi.12510
       
  • Social Capital, Trust, and Firm Performance: The Value of Corporate Social
           Responsibility during the Financial Crisis
    • Authors: KARL V. LINS; HENRI SERVAES, ANE TAMAYO
      Abstract: During the 2008 to 2009 financial crisis, firms with high social capital, as measured by corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low-CSR firms, and they raised more debt. This evidence suggests that the trust between a firm and both its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.This article is protected by copyright. All rights reserved
      PubDate: 2017-03-19T04:20:27.175593-05:
      DOI: 10.1111/jofi.12505
       
  • Do Funds Make More When They Trade More?
    • Authors: ĽUBOŠ PÁSTOR; ROBERT F. STAMBAUGH, LUCIAN A. TAYLOR
      Abstract: We model fund turnover in the presence of time-varying profit opportunities. Our model predicts a positive relation between an active fund's turnover and its subsequent benchmark-adjusted return. We find such a relation for equity mutual funds. This time-series relation between turnover and performance is stronger than the cross-sectional relation, as the model predicts. Also as predicted, the turnover-performance relation is stronger for funds trading less-liquid stocks and funds likely to possess greater skill. Turnover is correlated across funds. The common component of turnover is positively correlated with proxies for stock mispricing. Turnover of similar funds helps predict a fund's performance.
      PubDate: 2017-03-19T03:55:36.761194-05:
      DOI: 10.1111/jofi.12509
       
  • Advance Refundings of Municipal Bonds
    • Authors: ANDREW ANG; RICHARD C. GREEN, FRANCIS A. LONGSTAFF, YUHANG XING
      Abstract: The advance refunding of debt is a widespread practice in municipal finance. In an advance refunding, municipalities retire callable bonds early and refund them with bonds with lower coupon rates. We find that 85% of all advance refundings occur at a NPV loss, and that the aggregate losses over the past 20 years exceed $15 billion. We explore why municipalities advance refund their debt at loss. Financially constrained municipalities may face pressure to advance refund since it allows them to reduce short-term cash outflows. We find strong evidence that financial constraints are a major driver of advance refunding activity.This article is protected by copyright. All rights reserved
      PubDate: 2017-03-18T22:25:28.020526-05:
      DOI: 10.1111/jofi.12506
       
  • A Labor Capital Asset Pricing Model
    • Authors: LARS-ALEXANDER KUEHN; MIKHAIL SIMUTIN, JESSIE JIAXU WANG
      Abstract: We show that labor search frictions are an important determinant of the cross-section of equity returns. Empirically, we find that firms with low loadings on labor market tightness outperform firms with high loadings by 6% annually. We propose a partial equilibrium labor market model in which heterogeneous firms make dynamic employment decisions under labor search frictions. In the model, loadings on labor market tightness proxy for priced time-variation in the efficiency of the aggregate matching technology. Firms with low loadings are more exposed to adverse matching efficiency shocks and require higher expected stock returns.This article is protected by copyright. All rights reserved
      PubDate: 2017-03-18T07:55:27.471438-05:
      DOI: 10.1111/jofi.12504
       
  • Income Insurance and the Equilibrium Term Structure of Equity
    • Authors: ROBERTO MARFÈ
      Abstract: Output, wages, and dividends feature term structures of variance ratios that are respectively flat, increasing, and decreasing. Income insurance from shareholders to workers explains these term structures. Risk-sharing smooths wages but only concerns transitory risk and hence enhances short-run dividend risk. As a result, actual labor-share variation largely forecasts the risk, premium, and slope of dividend strips. A simple general equilibrium model in which labor rigidity affects dividend dynamics and the price of short-run risk reconciles standard asset pricing facts with the term structures of the equity premium, volatility, and macroeconomic variables, which are at odds in leading models.This article is protected by copyright. All rights reserved
      PubDate: 2017-03-18T05:25:38.827489-05:
      DOI: 10.1111/jofi.12508
       
  • Trader Leverage and Liquidity
    • Authors: C. BIGE KAHRAMAN; HEATHER E. TOOKES
      Abstract: Does trader leverage drive equity market liquidity? We use the unique features of the margin trading system in India to identify a causal relationship between traders’ ability to borrow and a stock's market liquidity. To quantify the impact of trader leverage, we employ a regression discontinuity design that exploits threshold rules that determine a stock's margin trading eligibility. We find that liquidity is higher when stocks become eligible for margin trading and that this liquidity enhancement is driven by margin traders’ contrarian strategies. Consistent with downward liquidity spirals due to deleveraging, we also find that this effect reverses during crises.This article is protected by copyright. All rights reserved
      PubDate: 2017-03-18T05:25:33.385381-05:
      DOI: 10.1111/jofi.12507
       
  • Short-Term Market Risks Implied by Weekly Options
    • Authors: TORBEN G. ANDERSEN; NICOLA FUSARI, VIKTOR TODOROV
      Abstract: We study short-maturity (“weekly”) S&P 500 index options which provide a direct way to analyze volatility and jump risks. Unlike longer-dated options, they are largely insensitive to the risk of intertemporal shifts in the economic environment. Adopting a novel semi-nonparametric approach, we uncover variation in the negative jump tail risk which is not spanned by market volatility and helps predict future equity returns. As such, our approach allows for easy identification of periods of heightened concerns about negative tail events that are not always “signaled” by the level of market volatility and elude standard asset pricing models.This article is protected by copyright. All rights reserved
      PubDate: 2017-02-23T06:50:28.217481-05:
      DOI: 10.1111/jofi.12486
       
  • Firm Age, Investment Opportunities, and Job Creation
    • Authors: MANUEL ADELINO; SONG MA, DAVID ROBINSON
      Abstract: New firms are an important source of job creation, but the underlying economic mechanisms for why this is so are not well understood. Using an identification strategy that links shocks to local income to job creation in the nontradable sector, we ask whether job creation arises more through new firm creation or through the expansion of existing firms. We find that new firms account for the bulk of net employment creation in response to local investment opportunities. We also find significant gross job creation and destruction by existing firms, suggesting that positive local shocks accelerate churn.This article is protected by copyright. All rights reserved
      PubDate: 2017-02-18T02:20:27.83183-05:0
      DOI: 10.1111/jofi.12495
       
  • Term Structure of Consumption Risk Premia in the Cross Section of Currency
           Returns
    • Authors: IRINA ZVIADADZE
      Abstract: I relate the downward-sloping term structure of currency carry returns to compensation for currency exposures to macroeconomic risk embedded in the joint dynamics of U.S. consumption, inflation, nominal interest rate, and their stochastic variance. The interest rate and inflation shocks play a prominent role. Higher yield currencies exhibit higher multi-period exposures to these shocks. The prices of these risk exposures are positive and sizeable across all investment horizons. The interest rate shock is qualitatively similar to the long-run risk of Bansal and Yaron (2004).This article is protected by copyright. All rights reserved
      PubDate: 2017-02-03T05:51:18.32463-05:0
      DOI: 10.1111/jofi.12501
       
  • The Effect of Housing on Portfolio Choice
    • Authors: RAJ CHETTY; LÁSZLÓ SÁNDOR, ADAM SZEIDL
      Abstract: We show that characterizing the effects of housing on portfolios requires distinguishing between the effects of home equity and mortgage debt. We isolate exogenous variation in home equity and mortgages by using differences across housing markets in house prices and housing supply elasticities as instruments. Increases in property value (holding home equity constant) reduce stockholdings, while increases in home equity wealth (holding property value constant) raise stockholdings. The stock share of liquid wealth would rise by one percentage point – 6% of the mean stock share – if a household were to spend 10% less on its house, holding fixed wealth.This article is protected by copyright. All rights reserved
      PubDate: 2017-02-03T00:55:37.205834-05:
      DOI: 10.1111/jofi.12500
       
  • Exchange Rates and Monetary Policy Uncertainty
    • Authors: PHILIPPE MUELLER; ALIREZA TAHBAZ-SALEHI, ANDREA VEDOLIN
      Abstract: We document that a trading strategy that is short the U.S. dollar and long other currencies exhibits significantly larger excess returns on days with scheduled Federal Open Market Committee (FOMC) announcements. We show that these excess returns (i) are higher for currencies with higher interest rate differentials vis-à-vis the U.S., (ii) increase with uncertainty about monetary policy, and (iii) increase further when the Federal Reserve adopts a policy of monetary easing. We interpret these excess returns as compensation for monetary policy uncertainty within a parsimonious model of constrained financiers who intermediate global demand for currencies.This article is protected by copyright. All rights reserved
      PubDate: 2017-02-02T07:20:39.112289-05:
      DOI: 10.1111/jofi.12499
       
  • The Flash Crash: High Frequency Trading in an Electronic Market
    • Authors: ANDREI KIRILENKO; ALBERT S. KYLE, MEHRDAD SAMADI, TUGKAN TUZUN
      Abstract: We study intraday market intermediation in an electronic market before and during a period of large and temporary selling pressure. On May 6, 2010, U.S. financial markets experienced a systemic intraday event – the Flash Crash – where a large automated selling program was rapidly executed in the E-mini S&P 500 stock index futures market. Using audit trail transaction-level data for the E-mini on May 6 and the previous three days, we find that the trading pattern of the most active nondesignated intraday intermediaries (classified as High Frequency Traders) did not change when prices fell during the Flash Crash.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-25T06:55:31.311478-05:
      DOI: 10.1111/jofi.12498
       
  • Capital Account Liberalization and Aggregate Productivity: The Role of
           Firm Capital Allocation
    • Authors: MAURICIO LARRAIN; SEBASTIAN STUMPNER
      Abstract: We study the effects of capital account liberalization on firm capital allocation and aggregate productivity in 10 Eastern European countries. Using a large firm-level data set, we show that capital account liberalization decreases the dispersion in the return to capital across firms, particularly in sectors more dependent on external finance. We provide evidence that capital account liberalization improves capital allocation by allowing financially constrained firms to demand more capital and produce at a more efficient level. Finally, using a model of misallocation we document that capital account liberalization increases aggregate productivity through more efficient capital allocation by 10% to 16%.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-25T06:55:29.241814-05:
      DOI: 10.1111/jofi.12497
       
  • Liquidity in a Market for Unique Assets: Specified Pool and
           To-Be-Announced Trading in the Mortgage-Backed Securities Market
    • Authors: PENGJIE GAO; PAUL SCHULTZ, ZHAOGANG SONG
      Abstract: Agency mortgage-backed securities (MBS) trade simultaneously in a market for specified pools (SPs) and in the to-be-announced (TBA) forward market. TBA trading creates liquidity by allowing thousands of different MBS to be traded in a handful of TBA contracts. SPs that are eligible to be traded as TBAs have significantly lower trading costs than other SPs. We present evidence that TBA eligibility, in addition to characteristics of TBA-eligible SPs, lowers trading costs. We show that dealers hedge SP inventory with TBA trades, and they are more likely to prearrange trades in SPs that are difficult to hedge.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-25T04:20:38.468371-05:
      DOI: 10.1111/jofi.12496
       
  • Finance and Growth at the Firm Level: Evidence from SBA Loans
    • Authors: J. DAVID BROWN; JOHN S. EARLE
      Abstract: We analyze linked databases on all SBA loans and lenders and on all U.S. employers to estimate the effects of financial access on employment growth. Estimation exploits the long panels and variation in local availability of SBA-intensive lenders. The results imply an increase of 3 to 3.5 jobs for each million dollars of loans, suggesting real effects of credit constraints. Estimated impacts are stronger for younger and larger firms and when local credit conditions are weak, but we find no clear evidence of cyclical variation. We estimate taxpayer costs per job created in the range of $21,000 to $25,000.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-24T02:20:39.027181-05:
      DOI: 10.1111/jofi.12492
       
  • Correlated Default and Financial Intermediation
    • Authors: GREGORY PHELAN
      Abstract: Financial intermediation naturally arises when knowing how loan payoffs are correlated is valuable for managing investments but lenders cannot easily observe that relationship. I show this result using a costly enforcement model in which lenders need ex-post incentives to enforce payments from defaulted loans and borrowers' payoffs are correlated. When projects have correlated outcomes, learning the state of one project (via enforcement) provides information about the states of other projects. A large correlated portfolio provides ex-post incentives for enforcement. Thus, intermediation dominates direct lending, and intermediaries are financed with risk-free deposits, earn positive profits, and hold systemic default risk.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-24T02:20:34.628567-05:
      DOI: 10.1111/jofi.12493
       
  • Forced Asset Sales and the Concentration of Outstanding Debt: Evidence
           from the Mortgage Market
    • Authors: GIOVANNI FAVARA; MARIASSUNTA GIANNETTI
      Abstract: We provide evidence that lenders differ in their ex post incentives to internalize price-default externalities associated with the liquidation of collateralized debt. Using the mortgage market as a laboratory, we conjecture that lenders with a large share of outstanding mortgages on their balance sheets internalize the negative spillovers associated with the liquidation of defaulting mortgages and thus are less inclined to foreclose. We provide evidence consistent with our conjecture. Arguably as a consequence, zip codes with higher concentration of outstanding mortgages experience smaller house prices declines. These results are not driven by unobservable zip code or lender characteristics.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-24T01:20:37.47906-05:0
      DOI: 10.1111/jofi.12494
       
  • Politically Connected Private Equity and Employment
    • Authors: MARA FACCIO; HUNG-CHIA HSU
      Abstract: We investigate the employment consequences of private equity buyouts. We find evidence of higher job creation, on average, at the establishments operated by targets of politically connected private equity firms than at those operated by targets of nonconnected private equity firms. Consistent with an exchange of favors story, establishments operated by targets of politically connected private equity firms increase employment more during election years and in states with high levels of corruption. In additional analyses we provide evidence of specific benefits experienced by target firms from their political connections. Our results are robust to tests designed to mitigate selection concerns.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-20T00:11:35.810772-05:
      DOI: 10.1111/jofi.12483
       
  • Asset Market Participation and Portfolio Choice over the Life-Cycle
    • Authors: ANDREAS FAGERENG; CHARLES GOTTLIEB, LUIGI GUISO
      Abstract: Using error-free data on life-cycle portfolio allocations of a large sample of Norwegian households, we document a double adjustment as households age: a rebalancing of the portfolio composition away from stocks as they approach retirement and stock market exit after retirement. When structurally estimating an extended life-cycle model, the parameter combination that best fits the data is one with a relatively large risk aversion, a small per-period participation cost, and a yearly probability of a large stock market loss in line with the frequency of stock market crashes in Norway.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-20T00:11:31.798806-05:
      DOI: 10.1111/jofi.12484
       
  • Does the Scope of the Sell-Side Analyst Industry Matter' An
           
    • Authors: KENNETH MERKLEY; RONI MICHAELY, JOSEPH PACELLI
      Abstract: We examine changes in the scope of the sell-side analyst industry and whether these changes impact information dissemination and the quality of analysts’ reports. Our findings suggest that changes in the number of analysts covering an industry impact analyst competition and have significant spillover effects on other analysts’ forecast accuracy, bias, report informativeness, and effort. These spillover industry effects are incremental to the effects of firm level changes in analyst coverage. Overall, a more significant sell-side analyst industry presence has positive externalities that can result in better functioning capital markets.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-20T00:11:25.784836-05:
      DOI: 10.1111/jofi.12485
       
  • Mortgage Debt Overhang: Reduced Investment by Homeowners at Risk of
           Default
    • Authors: BRIAN T. MELZER
      Abstract: Homeowners at risk of default face a debt overhang that reduces their incentive to invest in their property: in expectation, some value created by investments in the property will go to the lender. This agency conflict affects housing investments. Homeowners at risk of default cut back substantially on home improvements and mortgage principal payments, even when they appear financially unconstrained. Meanwhile, they do not reduce spending on assets that they may retain in default, including home appliances, furniture, and vehicles. These findings highlight an important financial friction that has stifled housing investment since the Great Recession.This article is protected by copyright. All rights reserved
      PubDate: 2017-01-20T00:11:19.408455-05:
      DOI: 10.1111/jofi.12482
       
  • ISSUE INFORMATION FM
    • Pages: 503 - 506
      PubDate: 2017-03-21T16:57:55.11853-05:0
      DOI: 10.1111/jofi.12450
       
  • AMUNDI SMITH BREEDEN PRIZES FOR 2016
    • Pages: 507 - 508
      PubDate: 2017-03-21T16:57:57.143917-05:
      DOI: 10.1111/jofi.12503
       
  • MISCELLANEA
    • Pages: 951 - 952
      PubDate: 2017-03-21T16:58:04.12526-05:0
      DOI: 10.1111/jofi.12449
       
  • ANNOUNCEMENTS
    • Pages: 953 - 953
      PubDate: 2017-03-21T16:58:03.307997-05:
      DOI: 10.1111/jofi.12491
       
  • ISSUE INFORMATION BM
    • Pages: 954 - 957
      PubDate: 2017-03-21T16:57:57.819559-05:
      DOI: 10.1111/jofi.12451
       
  • Precautionary Savings with Risky Assets: When Cash is Not Cash
    • Authors: RAN DUCHIN; THOMAS GILBERT, JARRAD HARFORD, CHRISTOPHER HRDLICKA
      Abstract: U.S. industrial firms invest heavily in noncash, risky financial assets such as corporate debt, equity, and mortgage-backed securities. Risky assets represent 40% of firms’ financial portfolios, or 6% of total book assets. We present a formal model to assess the optimality of this behavior. Consistent with the model, risky assets are concentrated in financially unconstrained firms holding large financial portfolios, are held by poorly governed firms, and are discounted by 13% to 22% compared to safe assets. We conclude that this activity represents an unregulated asset management industry of more than $1.5 trillion, questioning the traditional boundaries of nonfinancial firms.This article is protected by copyright. All rights reserved
      PubDate: 2016-12-19T06:50:36.762537-05:
      DOI: 10.1111/jofi.12490
       
  • Linear-Rational Term Structure Models
    • Authors: DAMIR FILIPOVIĆ; MARTIN LARSSON, ANDERS B. TROLLE
      Abstract: We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily accommodates unspanned factors affecting volatility and risk premiums, and iii) admits semi-analytical solutions to swaptions. A parsimonious model specification within the linear-rational class has a very good fit to both interest rate swaps and swaptions since 1997 and captures many features of term structure, volatility, and risk premium dynamics—including when interest rates are close to the zero lower bound.This article is protected by copyright. All rights reserved
      PubDate: 2016-12-16T01:50:25.034224-05:
      DOI: 10.1111/jofi.12488
       
  • Reverse Mortgage Loans: A Quantitative Analysis
    • Authors: MAKOTO NAKAJIMA; IRINA A. TELYUKOVA
      Abstract: Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. Despite rapid growth in this market, only 1.9% of eligible homeowners had RMLs in 2013. In this paper, we analyze reverse mortgages in a calibrated life-cycle model of retirement. The average welfare gain from RMLs is $252 per homeowner, and $1,770 per RML borrower. Bequest motives, uncertainty about health and expenses, and loan costs account for low demand. According to the model, the Great Recession's impact differs across age, income and wealth distributions, with a threefold increase in RML demand for lowest-income and oldest households.This article is protected by copyright. All rights reserved
      PubDate: 2016-12-13T09:00:51.423117-05:
      DOI: 10.1111/jofi.12489
       
  • On the Foundations of Corporate Social Responsibility
    • Authors: HAO LIANG; LUC RENNEBOOG
      Abstract: Using CSR ratings for 23,000 companies from 114 countries, we find that a firm's corporate social responsibility (CSR) rating and its country's legal origin are strongly correlated. Legal origin is a stronger explanation than “doing good by doing well” factors or firm and country characteristics (ownership concentration, political institutions, and globalization): firms from common law countries have lower CSR than companies from civil law countries, with Scandinavian civil law firms having the highest CSR ratings. Evidence from quasi-natural experiments such as scandals and natural disasters suggests that civil law firms are more responsive to CSR shocks than common law firms.This article is protected by copyright. All rights reserved
      PubDate: 2016-12-06T07:20:55.86561-05:0
      DOI: 10.1111/jofi.12487
       
  • Attracting Early-Stage Investors: Evidence from a Randomized Field
           Experiment
    • Authors: SHAI BERNSTEIN; ARTHUR KORTEWEG, KEVIN LAWS
      Abstract: This paper uses a randomized field experiment to identify which start-up characteristics are most important to investors in early-stage firms. The experiment randomizes investors’ information sets of fund-raising start-ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide evidence that the team is not merely a signal of quality, and that investing based on team information is a rational strategy. Together, our results indicate that information about human assets is causally important for the funding of early-stage firms and hence for entrepreneurial success.This article is protected by copyright. All rights reserved
      PubDate: 2016-09-20T22:55:21.683641-05:
      DOI: 10.1111/jofi.12470
       
  • Bank Leverage and Monetary Policy's Risk-Taking Channel: Evidence from the
           United States
    • Authors: GIOVANNI DELL'ARICCIA; LUC LAEVEN, GUSTAVO A. SUAREZ
      Abstract: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on banks’ internal ratings on loans to businesses over the period 1997 to 2011 from the Federal Reserve's Survey of Terms of Business Lending. We find that ex-ante risk-taking by banks (measured by the risk rating of new loans) is negatively associated with increases in short-term interest rates. This relationship is more pronounced in regions that are less in sync with the nationwide business cycle, and less pronounced for banks with relatively low capital or during periods of financial distress.This article is protected by copyright. All rights reserved
      PubDate: 2016-09-20T01:20:28.008141-05:
      DOI: 10.1111/jofi.12467
       
  • Before an Analyst Becomes an Analyst: Does Industry Experience Matter'
    • Authors: DANIEL BRADLEY; SINAN GOKKAYA, XI LIU
      Abstract: Using hand-collected biographical information on financial analysts from 1983 to 2011, we find that analysts making forecasts on firms in industries related to their pre-analyst experience have better forecast accuracy, evoke stronger market reactions to earning revisions, and are more likely to be named Institutional Investor all-stars. Exogenous losses of analysts with related industry experience have real financial market implications—changes in firms’ information asymmetry and price reactions are significantly larger than those of other analysts. Overall, industry expertise acquired from pre-analyst work experience is valuable to analysts, consistent with the emphasis placed on their industry knowledge by institutional investors.This article is protected by copyright. All rights reserved
      PubDate: 2016-09-20T01:20:23.953961-05:
      DOI: 10.1111/jofi.12466
       
 
 
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