Journal of Corporate Finance最新文献

This paper identifies an externality of a firm’s unionization that affects the financing decisions of non-unionized firms within a local labor market. We find that non-unionized firms increase their leverage ratios and hold less cash reserves following a union victory at other firms. This “shadow union” effect manifests through the heightened threat of unionization following shadow union organizing. Specifically, the effect is more pronounced when the probability of unionization rises by a larger margin and non-union firms face higher union rents conditional on being unionized. The threat appears credible enough to shape corporate financing decisions: shadow unions raise employees’ wages and the likelihood of subsequent union victories in the local labor market. Additional results indicate that the shadow union effect is distinct from leverage-mimicking behavior. Overall, our findings suggest that shadow labor market institutions create a strategic incentive for non-unionized firms to adopt less conservative financial policies to combat the union threat.

There are hundreds of scientific articles on experimental asset markets. Almost all of them use a short and definite horizon. This may be one of the starkest differences between experimental settings and real-world financial markets, which usually have indefinite and comparatively long horizons. We analyze the implications of different end time assumptions in an asset market experiment in which we vary the length of the horizon and whether the end time is definite or indefinite. We find very similar price dynamics with recurring bubbles in all treatments.

The paper exploits the deregulation of interstate bank branching laws to examine whether improved access to bank credit for customer firms affects the probability of their suppliers' financial distress. The study provides robust evidence that suppliers' financial distress risk is lower when the states of their major customer firms experience bank branching deregulation. Furthermore, the study shows that customers establish new bank relationships and improve liquidity conditions, while suppliers offer less trade credit to customers, reduce leverage, and increase capital expenditures following customer state's bank branching deregulation. The effect of customers' improved access to credit on suppliers' distress risk is more pronounced for supplier firms with stronger customer-supplier relationships, for financially constrained suppliers, and for suppliers whose customers are financially unconstrained. Overall, the findings highlight the importance of customers' access to credit on the financial distress risk of their suppliers.

We examine how the size of the labor market for corporate directors impacts board appointments in Italian private firms. Using the high-speed railway expansion as an exogenous shock to costs of serving on boards, we find that an increase in the supply of non-local directors leads to a higher degree of positive assortative matching between firms and directors. High-quality firms improve their board quality at the expense of low-quality firms. The director–firm matching effects are muted among companies with owners acting as board directors. This finding highlights the importance of director entrenchment in the corporate governance of private firms.

This paper examines the spillover effect of environmental regulatory pressure on firms' green technological innovation, from the perspective of supply chain relationships. Analyzing data from Chinese listed companies, we find that the average environmental regulatory pressure faced by the customer firms of a supplier firm enhances the green patent applications filed by the supplier firm. When the industry of the supplier is more competitive or the proportion of the supplier's sales from its largest customer is higher, the supplier feels more pressured to pursue green innovation, resulting in more green patent filings. Thus, via their negotiation power, customer firms can prompt the supplier firm to innovate to meet their demand for green technologies. Finally, we show that this effect is particularly pronounced when the supplier firm has a strong financial position, is located in a highly marketized region, receives low R&D government subsidies, or enjoys a high ESG rating.

This paper explores the interplay between politics and law enforcement in China and its effects on firm financing decisions. By examining a sample of corporate lawsuits involving listed firms in China, we find that politically connected firms are less likely to be defendants, have higher win rates, and experience shorter litigation durations than non-connected firms. Additionally, we observe that firms with higher legal risk extend more accounts receivable and receive less accounts payable, but this relationship holds only for non-connected firms. Our findings support the financing advantage theory for politically connected firms and the legal risk compensation view for non-connected firms. Moreover, reforms in China's judicial system do not appear to mitigate the disadvantages faced by non-connected firms in terms of lawsuit outcomes and trade credit provision. Our findings suggest that well-functioned judicial independence might be still lacking in China, and that political connections continue to negatively impact law enforcement and corporate policies.

Using a sample of Chinese firms from 2000 to 2018, we document that hometown firms (firms with hometown chairpersons) engage in less green innovation than non-hometown firms. Evidence suggests that local stakeholders offer hometown chairpersons more protection from environmental consequences than non-hometown chairpersons. We identify two possible mechanisms: government patronage and accommodation by local supply chain partners. Furthermore, we find that the double standards are alleviated with insignificant difference in corporate green innovation when non-hometown chairpersons marry hometown spouses or build local political relationships. Additional analyses suggest that (1) the double standards drive hometown firms to emit more pollutants than non-hometown firms, (2) when a firm is under government scrutiny for environmental issues, located in the city with severe air pollution, or in heavily polluting industries, the adverse effect of a chairperson's hometown on green innovation is minimal, and (3) our findings on green innovation also extend to a decrease in the number of pollutant treatment facilities and treatment capacity in a firm.

This paper presents evidence that the reduction in option tick size enhances equity price efficiency. To address the endogeneity issue, I employ an exogenous event, namely the Penny Pilot program. The findings indicate that option trading mitigates equity misvaluation, reduces price delay, accelerates the incorporation of future earnings into equity prices, and eliminates the well-known Post-Earnings Announcement Drift (PEAD). The pilot program significantly increases trading volume and reduces trading costs during the pilot period. Furthermore, the effect of options-to-stock volume on future stock returns is stronger in firms with high short-sale costs. This evidence is consistent with the hypothesis that informed trading boosts trading volume in the options market and integrates information from the options market into equity prices, thereby enhancing equity price efficiency.

Political uncertainty represents a key determinant of corporate investment decisions. In this paper, we study the relation between political uncertainty and investment from the perspective of institutional investors. Using U.S. equity holdings data from 13F filings, we find that institutional investors herd during politically uncertain times. This trading behavior is stronger when U.S. presidents are unpopular, due to their proclivity for controversial policies, and among riskier stocks. We also find that this mechanism, despite generating some excess trading, helps incorporate a risk premium into stock prices. Overall, the findings unveil a new channel through which political uncertainty affects financial markets.