Journal of Corporate Finance最新文献

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Personal financial incentives, corporate governance, and firms’ campaign contributions

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-14 DOI: 10.1016/j.jcorpfin.2024.102724

Viktar Fedaseyeu , Lev Lvovskiy

We find that corporate governance and executives’ personal financial incentives are important determinants of firms’ ability to extract benefits from political participation. Firms with more independent boards are more likely to establish corporate political action committees (PACs), and executives in such firms exhibit a stronger sensitivity of campaign contributions to their personal equity stakes. We also show that disperse ownership limits PACs’ ability to raise funds because even large firm-level benefits from political participation may become insignificant for individuals with small equity stakes. This may help explain why aggregate PAC contributions remain relatively small compared to the large firm-value benefits such contributions can provide. However, the negative effect of disperse ownership on political donations is mitigated by corporate governance, as well-governed firms are able to better align their managers’ incentives with the benefits from corporate political participation.

引用次数: 0

Economics of Ethereum

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-13 DOI: 10.1016/j.jcorpfin.2024.102718

Kose John , Barnabé Monnot , Peter Mueller , Fahad Saleh , Caspar Schwarz-Schilling

We provide comprehensive background regarding the Ethereum blockchain protocol, focusing especially on the economic incentives of participants. We begin by clarifying the transaction life-cycle from the user perspective, explaining how user transactions are submitted and settled on the blockchain. Thereafter, we explain how the Ethereum protocol selects proposers to propose blocks of transactions for inclusion on the blockchain and also attesters to vote for or against those blocks. We discuss both how the Proof-of-Stake protocol is used to select proposers and attesters, and also how the Gasper protocol is used to aggregate attester votes which thereby determine the finalized blockchain. Finally, we discuss how builders, searchers and relays have arisen to support and enhance the Ethereum block production process. Through our discussion, we clarify the economic trade-offs faced by each participant and the associated real-world decision variables for each participant.

引用次数: 0

Discontinuing analyst coverage due to resource reallocation: Euphemism for unfavorable firm outlook?

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-12 DOI: 10.1016/j.jcorpfin.2024.102725

Andreas Charitou , Irene Karamanou , Anastasia Kopita

Following the SRO rulings' requirement that analysts announce coverage terminations including either their final rating or the reason for the termination, we find 86.7 % of the voluntary terminations being attributed to ‘resources’ reallocation’ and only 13.3 % to firm poor outlook. Developing a classification algorithm to split the reallocation terminations into performance-based terminations (those driven by the dropped firm's poor outlook) and resource-constrained terminations (those unrelated to firm performance), we show that although the market's reaction to the termination announcement does not differ between the two sub-samples, future returns and financial performance of the performance-based sample significantly underperform those of the resource-constrained sample. We perform a number of additional analyses, including the use of terminations explicitly attributed to firm bleak output, to ex ante differentiate between the two types of reallocation terminations. We conclude that analysts withhold unfavorable news through the provision of news-neutral reasonings, in contrast to the regulators' intentions.

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引用次数: 0

Executive compensation and secured debt: Evidence from REITs

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-11 DOI: 10.1016/j.jcorpfin.2024.102727

Ying Li , Lingxiao Li , Bing Zhu

This paper explores the impact of executive compensation structure on firm debt choices. To analyze the relationship between executive compensation and firm debt structure via the managerial effort channel, we extend the theoretical model developed by Boot et al. (1991) by incorporating an agent-principal model. We employ data from US Equity Real Estate Investment Trusts (REITs) to empirically assess the model's implications. The evidence presented in this study reveals that when executive compensation exhibits a higher sensitivity to the firm's stock price (represented by a higher Delta), the firm tends to use a greater proportion of secured debt within its overall debt structure. This phenomenon can be attributed to the managerial effort channel: firms with higher Delta values tend to engage in investments that are more effort-sensitive, and these investment choices are positively associated with increased utilization of secured debt, where the collateral plays the role of incentivizing the manager to put more effort into projects – an “effort-lifting” behavior. These findings hold for an expanded sample consisting of firms from all industries. Our analysis offers a fresh perspective on the use of collateral and executive compensation as a tool to mitigate principal-agent problems.

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引用次数: 0

Fading virtue, flourishing profits: Corporate social responsibility in the presence of competitor constraints

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-11 DOI: 10.1016/j.jcorpfin.2024.102706

Xiaoqiong Wang , Xiaoyang Zhu

This paper examines the relationship between focal firms’ corporate social responsibility (CSR) and the financial constraints of their industry peers. We find that focal firms reduce their CSR investments in response to an increase in competitor financial constraints. Our findings are robust to two exogenous shocks: the 2008 financial crisis and the American Jobs Creation Act of 2004. We further show that product market competition drives our results by motivating firms to reallocate resources and prioritize investing in core business activities rather than CSR when peers face difficulty accessing funds. Intriguingly, the fading of such virtues does not necessarily lead to a decline in firm performance. We find that the reduction in CSR induced by peer financial constraints improves the profitability, operating efficiency, and market power of focal firms while attracting more institutional investors.

引用次数: 0

Does managerial compensation impact the likelihood of product market failures? Evidence from inside debt holdings

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-10 DOI: 10.1016/j.jcorpfin.2024.102726

Vincent J. Intintoli , Shweta Srinivasan

We study the impact of inside debt holdings on the likelihood of product market recalls. Consistent with inside debt better aligning incentives, we find it is negatively associated with subsequent recalls. This relation is pronounced for industries where managers have greater control over the supply chain and when examining severe recalls. Our results hold irrespective of the firm's financial constraints or cash flow risk. Inside debt has the greatest influence on older and longer tenured executives, indicating that managerial risk aversion plays an important role. Overall, our results indicate that compensation policies can have a positive effect by decreasing the likelihood of costly recalls.

引用次数: 0

U.S. multinationals' alternatives to paying taxes

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-05 DOI: 10.1016/j.jcorpfin.2024.102722

Jeremiah Harris , William O'Brien

We examine the impact of potential repatriation taxes on U.S. multinationals' pre-2018 tax planning actions and capital structure policies. We construct a proxy for exogenous changes to repatriation tax rates and find that repatriation-tax-sensitive multinationals are more likely to pursue tax-free repatriation techniques, with examples provided. We also find a positive relationship between repatriation tax increases and both bond issuance and debt ratios, but only for repatriation-tax-sensitive multinationals. These results are concentrated in firms with lower costs of debt capital, while no increased likelihood of inversions is found. Our findings have important implications for current and proposed U.S. tax policies.

引用次数: 0

Iron curtain echoes: The enduring impact of communism and crowdfunding

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-05 DOI: 10.1016/j.jcorpfin.2024.102723

Thien Le-Hoang Nguyen, Hui-Ching Hsieh

Do enduring effects of communism on human behaviors persist in the entrepreneurial financial market, particularly in the equity crowdfunding (ECF) market? Our study, utilizing the natural experimental setting provided by the German crowdfunding platform – Companisto – reveals the lingering shadow of communism in the investment strategies of individuals from East Germany. We posit that risk and time preferences shaped during prolonged exposure to communism deter investors from East Germany from making sound contributions to ECF campaigns. Further analyses of the moderating effects of investors' confidence and entrepreneurs' trustworthiness provide insights into their roles in the success of ECF campaigns.

引用次数: 0

Corporate tax cuts for small firms: What do firms do?

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-12-05 DOI: 10.1016/j.jcorpfin.2024.102709

Wei Cui , Mengying Wei , Weisi Xie , Jing Xing

What do small firms do when given a semi-permanent corporate income tax cut? We examine firm responses to a substantial reduction in the tax rate for small- and micro-profit enterprises (SMPE) in China, using gradual increases in the qualifying threshold during 2010–2016 for identification. Based on confidential tax returns, we find that newly qualified SMPEs with immediate tax savings increased investment and productivity, while there was no change in wages or payout to shareholders. There is some weak evidence the tax cut induced entry of micro-sized firms in financially constrained sectors. Yet its size-based design led to bunching and incentivized firms to slow down growth when they approached the size threshold.

引用次数: 0

Equity offering following cyberattacks

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance

Pub Date : 2024-11-28 DOI: 10.1016/j.jcorpfin.2024.102710

Xiaohui Liu, Juan Luo, Alfred Yawson

We investigate the impact of cyberattacks on a firm's equity issuance decisions. Our findings indicate that firms targeted by cyberattacks are less likely to pursue seasoned equity offerings (SEOs) afterward. This effect is more pronounced when the target firm has lower external financing needs and operates in a poor information environment. This result remains robust after addressing sample selection bias through propensity score matching and entropy balancing approaches. We attribute this reduction in SEO activities to reputation loss, investors' adverse selection, and the resulting higher equity financing costs. Furthermore, we demonstrate that the negative impact of cyberattacks on SEOs extends to industry peers. This spillover effect is stronger when the target firm suffers significant reputation loss, when the stock prices of peers closely correlate with those of the target firm, when peer firms possess a higher ex-ante cyber risk, and when they are more vulnerable to future cyberattacks.

引用次数: 0

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