Pub Date : 2025-07-23DOI: 10.1016/j.jcorpfin.2025.102854
William L. Megginson , Hyeonjoon Park
This study investigates how the Uniform Fraudulent Transfer Act (UFTA) shapes venture capital (VC) investment strategies and startup outcomes. Using data on 34,578 VC-backed startups from 1977 to 2019, we find that the UFTA inadvertently leads VC investors to prioritize existing portfolio companies over new investments, resulting in longer funding durations. Startups subsequently rely more heavily on secured debt and experience diminished innovation outcomes. Additionally, under heightened financial pressure, startups commit violations more frequently, particularly employment-related offenses. Nonetheless, startups backed by more experienced VCs demonstrate stronger innovation performance and are more likely to achieve successful exits through initial public offerings.
{"title":"The impact of enhanced creditor rights on venture capital: Evidence from the Uniform Fraudulent Transfer Act","authors":"William L. Megginson , Hyeonjoon Park","doi":"10.1016/j.jcorpfin.2025.102854","DOIUrl":"10.1016/j.jcorpfin.2025.102854","url":null,"abstract":"<div><div>This study investigates how the Uniform Fraudulent Transfer Act (UFTA) shapes venture capital (VC) investment strategies and startup outcomes. Using data on 34,578 VC-backed startups from 1977 to 2019, we find that the UFTA inadvertently leads VC investors to prioritize existing portfolio companies over new investments, resulting in longer funding durations. Startups subsequently rely more heavily on secured debt and experience diminished innovation outcomes. Additionally, under heightened financial pressure, startups commit violations more frequently, particularly employment-related offenses. Nonetheless, startups backed by more experienced VCs demonstrate stronger innovation performance and are more likely to achieve successful exits through initial public offerings.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102854"},"PeriodicalIF":5.9,"publicationDate":"2025-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144722129","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-21DOI: 10.1016/j.jcorpfin.2025.102855
Feng Cao , Haitong Li , Xueyan Zhang , Hong Zou
Leveraging the China Securities Regulatory Commission's annual random inspection exercise as a quasi-natural experiment, we document that the risk scrutiny of preventive regulatory enforcement creates regulatory uncertainty about inspected firms to business partners, leading them to reduce the provision of trade credit. Reduced access to trade credit is more pronounced for firms with weak bargaining power, high opacity, or low financial resilience. Reduced access is also evident in both ‘compliant’ and non-compliant firms, though the reduction gradually subsides as uncertainty dissipates in different ways for the two types of inspected firms. Our findings uncover an important unintended effect of preventive regulation and have implications for policy making.
{"title":"Preventive regulatory enforcement and access to trade credit: Evidence from a quasi-natural experiment","authors":"Feng Cao , Haitong Li , Xueyan Zhang , Hong Zou","doi":"10.1016/j.jcorpfin.2025.102855","DOIUrl":"10.1016/j.jcorpfin.2025.102855","url":null,"abstract":"<div><div>Leveraging the China Securities Regulatory Commission's annual random inspection exercise as a quasi-natural experiment, we document that the risk scrutiny of preventive regulatory enforcement creates regulatory uncertainty about inspected firms to business partners, leading them to reduce the provision of trade credit. Reduced access to trade credit is more pronounced for firms with weak bargaining power, high opacity, or low financial resilience. Reduced access is also evident in both ‘compliant’ and non-compliant firms, though the reduction gradually subsides as uncertainty dissipates in different ways for the two types of inspected firms. Our findings uncover an important unintended effect of preventive regulation and have implications for policy making.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"96 ","pages":"Article 102855"},"PeriodicalIF":5.9,"publicationDate":"2025-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145325952","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-19DOI: 10.1016/j.jcorpfin.2025.102849
Tiago Loncan
We study the effects of employee welfare policies (EWPs) on labor investments of U.S. firms. We show that EWPs are associated with a significantly weaker pass-through of industry sales shocks to firm employment growth. EWPs’ insulation effect is stronger in states with less generous unemployment insurance, in states with lower wage growth, and in firms relying more on qualified labor. We corroborate our results exploring policy-induced variation in workforce policies from the adoption of Paid Sick Leave laws, and industry-wide shocks to labor ESG incidents. Our findings suggest that EWPs may insure workers against employment fluctuations.
{"title":"Can employee welfare policies insure workers against fluctuations in employment?","authors":"Tiago Loncan","doi":"10.1016/j.jcorpfin.2025.102849","DOIUrl":"10.1016/j.jcorpfin.2025.102849","url":null,"abstract":"<div><div>We study the effects of employee welfare policies (EWPs) on labor investments of U.S. firms. We show that EWPs are associated with a significantly weaker pass-through of industry sales shocks to firm employment growth. EWPs’ insulation effect is stronger in states with less generous unemployment insurance, in states with lower wage growth, and in firms relying more on qualified labor. We corroborate our results exploring policy-induced variation in workforce policies from the adoption of Paid Sick Leave laws, and industry-wide shocks to labor ESG incidents. Our findings suggest that EWPs may insure workers against employment fluctuations.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102849"},"PeriodicalIF":7.2,"publicationDate":"2025-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144679663","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-17DOI: 10.1016/j.jcorpfin.2025.102850
Peter Cheng , Lin Li , Wilson H.S. Tong , Chingfu Tsai
We demonstrate that a persistent pattern exists in the evolution of the MTB ratio from 1999 to 2023, wherein firms with high (low) MTB ratios tend to maintain those levels over time. The persistence of the MTB ratio is independent of industry effects and cannot be well explained by accounting performance. Intangible investment plays a crucial role in determining the MTB ratio, and its persistence is primarily maintained through continued internal intangible investment rather than external mergers and acquisitions. Moreover, although U.S. firms have increased their investment in intangible assets over the past 25 years, the gap between high- and low-MTB firms in intangible investment has widened. Our results suggest that the basis of stock value has shifted from tangible to intangible investments over time.
{"title":"The intangible shift: Redefining the dynamics of market-to-book ratios","authors":"Peter Cheng , Lin Li , Wilson H.S. Tong , Chingfu Tsai","doi":"10.1016/j.jcorpfin.2025.102850","DOIUrl":"10.1016/j.jcorpfin.2025.102850","url":null,"abstract":"<div><div>We demonstrate that a persistent pattern exists in the evolution of the MTB ratio from 1999 to 2023, wherein firms with high (low) MTB ratios tend to maintain those levels over time. The persistence of the MTB ratio is independent of industry effects and cannot be well explained by accounting performance. Intangible investment plays a crucial role in determining the MTB ratio, and its persistence is primarily maintained through continued internal intangible investment rather than external mergers and acquisitions. Moreover, although U.S. firms have increased their investment in intangible assets over the past 25 years, the gap between high- and low-MTB firms in intangible investment has widened. Our results suggest that the basis of stock value has shifted from tangible to intangible investments over time.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102850"},"PeriodicalIF":7.2,"publicationDate":"2025-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144679664","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-11DOI: 10.1016/j.jcorpfin.2025.102814
Yehuda Davis , Suresh Govindaraj , Tavish Tejas
We develop a model to examine how rational risk-averse individuals react and rearrange their consumption and investment choices in the presence of tax exclusions on the returns from risky assets that exclude a fixed amount of capital gains from taxation. We are specifically interested in the implications and efficacy of these special kinds of tax incentives that are commonly used to encourage investments in risky assets internationally. We also allow for tax rate uncertainty. We show that the effects of these tax exclusions on investors are nuanced and may not always achieve the desired policy objective of stimulating higher investments in risky assets. We identify the endogenously computed regions with shared common boundaries where increasing capital gains tax exclusions will stimulate higher demand for risky assets, have no effect on demand at all, or even have an opposite effect by reducing demand. While our results apply to tax exclusions in general, we provide two specific examples using (i) data from the United States housing market, and (ii) the United Kingdom stock market, for a CRRA investor. We also provide insights on the pricing and related issues for these tax-favored risky assets.
{"title":"The demand for tax-favored risky assets with capital gains tax exclusions, tax policy uncertainty, and its implications for pricing","authors":"Yehuda Davis , Suresh Govindaraj , Tavish Tejas","doi":"10.1016/j.jcorpfin.2025.102814","DOIUrl":"10.1016/j.jcorpfin.2025.102814","url":null,"abstract":"<div><div>We develop a model to examine how rational risk-averse individuals react and rearrange their consumption and investment choices in the presence of tax exclusions on the returns from risky assets that exclude a fixed amount of capital gains from taxation. We are specifically interested in the implications and efficacy of these special kinds of tax incentives that are commonly used to encourage investments in risky assets internationally. We also allow for tax rate uncertainty. We show that the effects of these tax exclusions on investors are nuanced and may not always achieve the desired policy objective of stimulating higher investments in risky assets. We identify the endogenously computed regions with shared common boundaries where increasing capital gains tax exclusions will stimulate higher demand for risky assets, have no effect on demand at all, or even have an opposite effect by reducing demand. While our results apply to tax exclusions in general, we provide two specific examples using (i) data from the United States housing market, and (ii) the United Kingdom stock market, for a CRRA investor. We also provide insights on the pricing and related issues for these tax-favored risky assets.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102814"},"PeriodicalIF":7.2,"publicationDate":"2025-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144653276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-09DOI: 10.1016/j.jcorpfin.2025.102845
Sandeep Dahiya , Issam Hallak , Thomas Matthys
We examine the effect of relationship lending on a firm’s cash-holding levels. Relationship lending allows lenders to generate private information about borrowers, which mitigates their financial constraints. Using exogenous shocks to identify stress to lending relationships, we show that strong lending relationships translate into lower cash holding for borrowers. We also show that the impact of lending relationships on cash holdings is greatest for firms faced with high information asymmetry. Thus, opaque firms are more likely to use their borrowing relationship as a substitute for cash holdings. We find that relationships have a negative impact on the market value through a firms’ level of cash holding. This impact is significantly greater when firms experience a large change in their cash holdings.
{"title":"Cash holdings and relationship lending","authors":"Sandeep Dahiya , Issam Hallak , Thomas Matthys","doi":"10.1016/j.jcorpfin.2025.102845","DOIUrl":"10.1016/j.jcorpfin.2025.102845","url":null,"abstract":"<div><div>We examine the effect of relationship lending on a firm’s cash-holding levels. Relationship lending allows lenders to generate private information about borrowers, which mitigates their financial constraints. Using exogenous shocks to identify stress to lending relationships, we show that strong lending relationships translate into lower cash holding for borrowers. We also show that the impact of lending relationships on cash holdings is greatest for firms faced with high information asymmetry. Thus, opaque firms are more likely to use their borrowing relationship as a substitute for cash holdings. We find that relationships have a negative impact on the market value through a firms’ <em>level</em> of cash holding. This impact is significantly greater when firms experience a large <em>change</em> in their cash holdings.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102845"},"PeriodicalIF":7.2,"publicationDate":"2025-07-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144686550","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-09DOI: 10.1016/j.jcorpfin.2025.102839
Daniel Ferreira , Tom Kirchmaier , Daniel Metzger , Shiwei Ye
Bank board directors are highly independent but possess limited prior banking experience. Using a sample of banks from 90 countries between 2000 and 2020, we find that country-specific characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics have little explanatory power for boards’ banking experience. While we document evidence of international convergence in bank board independence, U.S. banks lag behind their global counterparts in director banking experience. The data suggest that country-specific laws and regulations primarily shape bank board composition through requirements for director independence.
{"title":"Boards of Banks","authors":"Daniel Ferreira , Tom Kirchmaier , Daniel Metzger , Shiwei Ye","doi":"10.1016/j.jcorpfin.2025.102839","DOIUrl":"10.1016/j.jcorpfin.2025.102839","url":null,"abstract":"<div><div>Bank board directors are highly independent but possess limited prior banking experience. Using a sample of banks from 90 countries between 2000 and 2020, we find that country-specific characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics have little explanatory power for boards’ banking experience. While we document evidence of international convergence in bank board independence, U.S. banks lag behind their global counterparts in director banking experience. The data suggest that country-specific laws and regulations primarily shape bank board composition through requirements for director independence.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102839"},"PeriodicalIF":7.2,"publicationDate":"2025-07-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144631704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Does trading away from public exchanges affect the way top executives are paid? Yes, our study finds that companies with a higher proportion of shares traded in “dark” (i.e., off-exchange) venues tend to offer more stock-based compensation to their CEOs. This relationship is primarily driven by enhanced price informativeness in lit (i.e., on-exchange/public) markets resulting from dark trading activities, making stock-based compensation a more attractive and effective tool for aligning executive incentives with shareholder returns. Consistent with this explanation, we show that the effect is most pronounced in firms where the impact of dark trading is likely greatest on price informativeness (firms with opaque information environments) and where compensation committees are more likely to extract information from stock prices (committees possessing greater financial expertise, higher equity ownership, and fewer external commitments). To address endogeneity concerns, we employ a treatment effects model and a difference-in-differences framework using the SEC's Tick Size Pilot Program as an exogenous shock to dark trading.
{"title":"Dark Trading and Stock-based CEO Pay","authors":"Khaladdin Rzayev , Tanseli Savaser , Elif Sisli-Ciamarra","doi":"10.1016/j.jcorpfin.2025.102848","DOIUrl":"10.1016/j.jcorpfin.2025.102848","url":null,"abstract":"<div><div><em>Does trading away from public exchanges affect the way top executives are paid?</em> Yes, our study finds that companies with a higher proportion of shares traded in “dark” (i.e., off-exchange) venues tend to offer more stock-based compensation to their CEOs. This relationship is primarily driven by enhanced price informativeness in lit (i.e., on-exchange/public) markets resulting from dark trading activities, making stock-based compensation a more attractive and effective tool for aligning executive incentives with shareholder returns. Consistent with this explanation, we show that the effect is most pronounced in firms where the impact of dark trading is likely greatest on price informativeness (firms with opaque information environments) and where compensation committees are more likely to extract information from stock prices (committees possessing greater financial expertise, higher equity ownership, and fewer external commitments). To address endogeneity concerns, we employ a treatment effects model and a difference-in-differences framework using the SEC's Tick Size Pilot Program as an exogenous shock to dark trading.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102848"},"PeriodicalIF":5.9,"publicationDate":"2025-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144723822","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A large literature emphasizes financial networks, but understanding how these networks influence lending decisions over the business cycle remains challenging. We exploit the overlapping bank portfolio structure of US syndicated loans to construct a financial network. Using techniques from spatial econometrics, we document large spillovers in lending conditions during good times, driven by commonality in banks’ loan portfolio exposures. A standard deviation increase in peers’ lending rates is associated with an increase in a bank’s lending rate of 17 basis points. However, these spillovers vanish in a large recession. We interpret these findings through a syndicate lending model where information spillovers driven by loan portfolio commonality dilute banks’ incentives to produce private information on borrowers during good times.
{"title":"Networks and information in credit markets","authors":"Abhimanyu Gupta , Sotirios Kokas , Alexander Michaelides , Raoul Minetti","doi":"10.1016/j.jcorpfin.2025.102840","DOIUrl":"10.1016/j.jcorpfin.2025.102840","url":null,"abstract":"<div><div>A large literature emphasizes financial networks, but understanding how these networks influence lending decisions over the business cycle remains challenging. We exploit the overlapping bank portfolio structure of US syndicated loans to construct a financial network. Using techniques from spatial econometrics, we document large spillovers in lending conditions during good times, driven by commonality in banks’ loan portfolio exposures. A standard deviation increase in peers’ lending rates is associated with an increase in a bank’s lending rate of 17 basis points. However, these spillovers vanish in a large recession. We interpret these findings through a syndicate lending model where information spillovers driven by loan portfolio commonality dilute banks’ incentives to produce private information on borrowers during good times.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102840"},"PeriodicalIF":7.2,"publicationDate":"2025-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144534460","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-30DOI: 10.1016/j.jcorpfin.2025.102843
Huu Nhan Duong , Petko S. Kalev , Madhu Kalimipalli , Saurabh Trivedi
This paper contributes to existing climate finance literature by examining how firms' proactive management of carbon risks affects market assessment of their credit risk. Using two quasi-exogenous events involving the 2015 Paris Climate Agreement and the staggered implementation of U.S. state climate adaptation plans, we find that stronger carbon risk management is associated with significantly lower credit default swap spreads. Our results are not driven by firm-level climate exposure, and social or governance risk. Firms with better carbon risk management also exhibit lower subsequent carbon emissions. Our paper highlights the importance of carbon risk management in mitigating credit risk.
{"title":"Do firms benefit from carbon risk management? Evidence from the credit default swaps market","authors":"Huu Nhan Duong , Petko S. Kalev , Madhu Kalimipalli , Saurabh Trivedi","doi":"10.1016/j.jcorpfin.2025.102843","DOIUrl":"10.1016/j.jcorpfin.2025.102843","url":null,"abstract":"<div><div>This paper contributes to existing climate finance literature by examining how firms' proactive management of carbon risks affects market assessment of their credit risk. Using two quasi-exogenous events involving the 2015 Paris Climate Agreement and the staggered implementation of U.S. state climate adaptation plans, we find that stronger carbon risk management is associated with significantly lower credit default swap spreads. Our results are not driven by firm-level climate exposure, and social or governance risk. Firms with better carbon risk management also exhibit lower subsequent carbon emissions. Our paper highlights the importance of carbon risk management in mitigating credit risk.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"94 ","pages":"Article 102843"},"PeriodicalIF":7.2,"publicationDate":"2025-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144580246","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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