Journal of Corporate Finance最新文献

Utilizing positive quasi-random shocks to local housing prices in Shanghai, we show that stock investors who experienced significant returns from the real estate market traded less actively, took less risk, and spent less effort trading. We confirm the effect of housing price changes on investors' trading behavior in a national sample. Our findings suggest a substitution effect between the real estate and stock market and highlight the importance of understanding investors' trading behavior in light of intertemporal variations in other asset market.

The decision to participate in a follow-on investment round is fundamental for venture capitalists, as it determines the extent of financial and non-financial resources they will provide to the portfolio company going forward. In this context, we analyze the effect of sunk costs, i.e., the invested capital and monitoring efforts expended, on the likelihood of subsequent funding. Based on a dataset of 30,602 investment decisions about US-based portfolio companies from 2009 to 2019, we find that both the amount of capital previously invested and the intensity of monitoring significantly increase the probability of continued investment, underscoring the sunk cost fallacy's role in venture capital. Additionally, we investigate the moderating effects of fund maturity, represented by dry powder and fund age, on these relationships. The results highlight the intricate balance between investment biases and fund-level considerations in venture capital decisions, contributing to the behavioral finance literature.

We examine managerial activism through collective action in the corporate sector. Activist managers spend considerable resources in pursuing pro-business and pro-manager issues. While managerial activism is valuable in the pursuit of pro-business strategies, pro-manager agendas may exacerbate agency problems. Our evidence shows that firm performance improves with managerial activism through collective pro-business effort but is diminished by pro-manager activism. Furthermore, pro-business activism typically increases CEO compensation, whereas pro-manager activism decreases it. Firms that benefit most from collective managerial activism are those that are government dependent, have more intangible assets, or operate in industries with low competition. Overall, pro-business managerial activism adds value to firms, especially when information dissemination is more essential due to firm characteristics.

By using institutional trading data in a sample of US IPOs, I provide evidence that IPO syndicate banks use their affiliated institutional investors to build a relationship with IPO lead underwriters and boost their underwriting business. First, I show that investment managers provide unprofitable price support in the aftermarket of IPOs in which their parent banks are non-lead syndicate members. This costly support is concentrated in cold IPOs and IPOs net sold by independent institutions. Second, I show that lead underwriters are more likely to select in the IPO syndicate the banks whose affiliated institutional investors support IPO prices. I discuss and document evidence of the incentives of underwriters and affiliated institutions that make price support emerge in equilibrium.

This paper examines the impact of the local opioid epidemic on corporate innovation. Utilizing a large sample of U.S. public firms from 2003 to 2017, we find that firms located in counties with higher death rates caused by opioid overdoses are significantly less innovative as measured by their patenting activities. To establish causality, we exploit the state implementations of the Prescription Drug Monitoring Programs (PDMPs) as quasi-experiments and an instrumented variable approach. We find suggestive evidence that the opioid epidemic hinders local firms' innovation by increasing healthcare costs, decreasing productivity, and through the exodus of local inventors.

This paper examines how environmental and social (ES) performance, proxied by related incidents, affect the managerial and analyst tones in quarterly earnings conference calls and its incremental effect on post-earnings call returns. We document that firms experiencing poor ES performance in the quarter prior to the earnings call exhibit more negative management tone after controlling for quarterly financial performance metrics. Tone difference in conference calls between managers and analysts predicts negative abnormal returns in the three-day window around the call. In the 60-day post-call period, we show that firms with poor ES performance exhibit returns negatively related to the tone difference on the conference call – low tone difference leads to return continuation and high tone difference predicts reversals for firms with positive earnings surprises. These results are consistent with an increase in information asymmetry and lower transparency for firms following poor ES performance.

We jointly model green and regular bond markets. Green bonds can improve allocative efficiency and lower financing costs for green projects, but economies of scale, like liquidity fragmentation, may cause friction. Consequently, profitable and welfare-enhancing projects, green and brown, can be rationed in equilibrium. Rationing green projects happens with a shortage of climate investors, large non-monetary offsets, and/or costly fragmentation. Rationing regular projects can happen with a shortage of regular investors, but also with an abundance, when more profitable green projects crowd out regular ones. We propose an alternative security design that preserves green earmarking but prevents fragmentation.

In this study, we explore the impact of the establishment of environmental courts, an environmental justice system, on the cost of equity capital. Based on a quasi-natural experiment of establishing environmental courts in China, we find that they have a deterrent effect and reduce the cost of equity capital for heavily polluting firms in localities. We also find that a low proportion of managerial ownership, a low level of analyst attention, and high environmental uncertainty induce this deterrent effect. Furthermore, mechanism tests indicate that environmental courts enhance corporate environmental engagement and corporate ESG ratings, increase long-term institutional investor ownership, and reduce urban environmental violations to achieve a deterrent effect. The findings are more pronounced for the trial court sample, firms in cities with lower public participation in environmental protection, and firms with lower environmental information transparency. We also suggest the impacts and underlying mechanisms of the environmental justice system on the equity capital market, which is conducive to long-term planning by firm managers.

Stock market trading restrictions affect prices and liquidity directly through constraints on investors' transactions and indirectly by altering the information environment. We isolate this indirect effect by analyzing how stock market restrictions affect corporate bond yields. Exploiting the staggered reductions of trading restrictions in the Chinese stock market as a quasi-natural experiment, we document that the easing of trading restrictions on a firm's stock decreases its corporate bond spreads. This effect is stronger for firms with less transparency or lower credit ratings. Our evidence suggests that the effect is likely due to improved stock price informativeness.

In their article “Innovation and Institutional Ownership”, Aghion, Van Reenen and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that “contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation” (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.