AZI BEN-REPHAEL, BRUCE I. CARLIN, ZHI DA, RYAN D. ISRAELSEN
We analyze minute-by-minute Bloomberg online status and study how the effort provision of executives in public corporations affects firm value. While executives spend most of their time doing other activities, patterns of Bloomberg usage allow us to characterize their work habits as measures of effort provision. We document a positive effect of effort on unexpected earnings and cumulative abnormal returns following earnings announcements, and a reduction in credit default swap spreads. This is robust to using exogenous weather patterns as an instrument. Long-short, calendar-time effort portfolios earn significant average daily returns. Finally, we revisit important agency issues from the literature.
{"title":"Uncovering the Hidden Effort Problem","authors":"AZI BEN-REPHAEL, BRUCE I. CARLIN, ZHI DA, RYAN D. ISRAELSEN","doi":"10.1111/jofi.13429","DOIUrl":"https://doi.org/10.1111/jofi.13429","url":null,"abstract":"We analyze minute-by-minute Bloomberg online status and study how the effort provision of executives in public corporations affects firm value. While executives spend most of their time doing other activities, patterns of Bloomberg usage allow us to characterize their work habits as measures of effort provision. We document a positive effect of effort on unexpected earnings and cumulative abnormal returns following earnings announcements, and a reduction in credit default swap spreads. This is robust to using exogenous weather patterns as an instrument. Long-short, calendar-time effort portfolios earn significant average daily returns. Finally, we revisit important agency issues from the literature.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"16 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-02-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143427265","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}
W. SCOTT FRAME, RUIDI HUANG, ERICA XUEWEI JIANG, YEONJOON LEE, WILL SHUO LIU, ERIK J. MAYER, ADI SUNDERAM
We study links between the labor market for loan officers and access to mortgage credit. Using novel data matching mortgage applications to loan officers, we find that minorities are underrepresented among loan officers. Minority borrowers are less likely to complete mortgage applications, have completed applications approved, and to ultimately take up a loan. These disparities are reduced when minority borrowers work with minority loan officers. These pairings also lead to lower default rates, suggesting minority loan officers have an informational advantage with minority borrowers. Our results suggest minority underrepresentation among loan officers reduces minority borrowers’ access to credit.
{"title":"The Impact of Minority Representation at Mortgage Lenders","authors":"W. SCOTT FRAME, RUIDI HUANG, ERICA XUEWEI JIANG, YEONJOON LEE, WILL SHUO LIU, ERIK J. MAYER, ADI SUNDERAM","doi":"10.1111/jofi.13428","DOIUrl":"https://doi.org/10.1111/jofi.13428","url":null,"abstract":"We study links between the labor market for loan officers and access to mortgage credit. Using novel data matching mortgage applications to loan officers, we find that minorities are underrepresented among loan officers. Minority borrowers are less likely to complete mortgage applications, have completed applications approved, and to ultimately take up a loan. These disparities are reduced when minority borrowers work with minority loan officers. These pairings also lead to lower default rates, suggesting minority loan officers have an informational advantage with minority borrowers. Our results suggest minority underrepresentation among loan officers reduces minority borrowers’ access to credit.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"71 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143393063","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}
This paper uses new data to provide a comprehensive view of repo activity during the 2007 global financial crisis. We show that activity declined much more in the bilateral segment of the market than in the tri-party segment. Surprisingly, a large share of the decline in activity is driven by repos backed by Treasury securities. Further, a disproportionate share of the decline in repo activity is connected to securities dealer's market-making activity. In particular, the evidence suggests that at least part of the decline is not driven by clients pulling away from securities dealers because of counterparty credit concerns.
{"title":"Repo over the Financial Crisis","authors":"ADAM COPELAND, ANTOINE MARTIN","doi":"10.1111/jofi.13406","DOIUrl":"https://doi.org/10.1111/jofi.13406","url":null,"abstract":"This paper uses new data to provide a comprehensive view of repo activity during the 2007 global financial crisis. We show that activity declined much more in the bilateral segment of the market than in the tri-party segment. Surprisingly, a large share of the decline in activity is driven by repos backed by Treasury securities. Further, a disproportionate share of the decline in repo activity is connected to securities dealer's market-making activity. In particular, the evidence suggests that at least part of the decline is not driven by clients pulling away from securities dealers because of counterparty credit concerns.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"65 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143385798","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}
JOSEPH KALMENOVITZ, MICHELLE LOWRY, EKATERINA VOLKOVA
Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government's official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. Fragmentation increases the firm's costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry and increases the propensity of small firms to exit. These effects arise from redundancy and, more prominently, from inconsistencies between government agencies. Our results uncover a new source of regulatory burden, and we show that agency costs among regulators contribute to this burden.
{"title":"Regulatory Fragmentation","authors":"JOSEPH KALMENOVITZ, MICHELLE LOWRY, EKATERINA VOLKOVA","doi":"10.1111/jofi.13423","DOIUrl":"https://doi.org/10.1111/jofi.13423","url":null,"abstract":"Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government's official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. Fragmentation increases the firm's costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry and increases the propensity of small firms to exit. These effects arise from redundancy and, more prominently, from inconsistencies between government agencies. Our results uncover a new source of regulatory burden, and we show that agency costs among regulators contribute to this burden.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"53 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143072031","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}
Using administrative data for 63,000 individuals across 2,500,000 person‐month observations, we find that wealthier individuals have better life insurance coverage, controlling for the value of the asset insured, namely, the consumption needs of dependents. This positive wealth‐insurance correlation, which is surprising given the prevailing view that wealth substitutes for insurance, persists after allowing for wealth‐related differences in risk or bequest preferences, pricing, background risk, education, employment, or liquidity constraints. Our findings call for further investigation of this wealth‐coverage correlation but support theories emphasizing the consumption‐smoothing role of insurance across not only states of the world, but also time.
{"title":"Wealth and Insurance Choices: Evidence from U.S. Households","authors":"MICHAEL J. GROPPER, CAMELIA M. KUHNEN","doi":"10.1111/jofi.13426","DOIUrl":"https://doi.org/10.1111/jofi.13426","url":null,"abstract":"Using administrative data for 63,000 individuals across 2,500,000 person‐month observations, we find that wealthier individuals have better life insurance coverage, controlling for the value of the asset insured, namely, the consumption needs of dependents. This positive wealth‐insurance correlation, which is surprising given the prevailing view that wealth substitutes for insurance, persists after allowing for wealth‐related differences in risk or bequest preferences, pricing, background risk, education, employment, or liquidity constraints. Our findings call for further investigation of this wealth‐coverage correlation but support theories emphasizing the consumption‐smoothing role of insurance across not only states of the world, but also time.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"18 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143072029","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}
We model the “feedback effect” of a firm's stock price on investment in projects exposed to a systematic risk factor, like climate risk. The stock price reflects information about both the project's cash flows and its discount rate. A cash‐flow‐maximizing manager treats discount rate fluctuations as “noise,” but a price‐maximizing manager interprets such variation as information about the project's net present value. This difference qualitatively changes how investment behavior varies with the project's risk exposure. Moreover, traditional objectives (e.g., cash flow or price maximization) need not maximize welfare because they do not correctly account for hedging and risk‐sharing benefits of investment.
{"title":"Feedback Effects and Systematic Risk Exposures","authors":"SNEHAL BANERJEE, BRADYN BREON‐DRISH, KEVIN SMITH","doi":"10.1111/jofi.13427","DOIUrl":"https://doi.org/10.1111/jofi.13427","url":null,"abstract":"We model the “feedback effect” of a firm's stock price on investment in projects exposed to a systematic risk factor, like climate risk. The stock price reflects information about both the project's cash flows and its discount rate. A cash‐flow‐maximizing manager treats discount rate fluctuations as “noise,” but a price‐maximizing manager interprets such variation as information about the project's net present value. This difference qualitatively changes how investment behavior varies with the project's risk exposure. Moreover, traditional objectives (e.g., cash flow or price maximization) need not maximize welfare because they do not correctly account for hedging and risk‐sharing benefits of investment.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"6 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143072030","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}
We model the optimal resolution of insolvent firms in general equilibrium. Collateral‐constrained banks lend to (i) solvent firms to finance investments and (ii) distressed firms to avoid liquidation. Liquidations create negative fire‐sale externalities. Liquidations also relieve bank balance–sheet congestion, enabling new firm loans that generate positive collateral externalities by lowering bank borrowing rates. Socially optimal interventions encourage liquidation when firms have high operating losses, high leverage, or low productivity. Surprisingly, larger fire sales promote interventions encouraging more liquidations. We study synergies between insolvency interventions and macroprudential regulation, bailouts, deferred loss recognition, and debt subordination. Our model elucidates historical crisis interventions.
{"title":"Crisis Interventions in Corporate Insolvency","authors":"SAMUEL ANTILL, CHRISTOPHER CLAYTON","doi":"10.1111/jofi.13421","DOIUrl":"https://doi.org/10.1111/jofi.13421","url":null,"abstract":"We model the optimal resolution of insolvent firms in general equilibrium. Collateral‐constrained banks lend to (i) solvent firms to finance investments and (ii) distressed firms to avoid liquidation. Liquidations create negative fire‐sale externalities. Liquidations also relieve bank balance–sheet congestion, enabling new firm loans that generate positive collateral externalities by lowering bank borrowing rates. Socially optimal interventions encourage liquidation when firms have high operating losses, high leverage, or low productivity. Surprisingly, larger fire sales promote interventions encouraging more liquidations. We study synergies between insolvency interventions and macroprudential regulation, bailouts, deferred loss recognition, and debt subordination. Our model elucidates historical crisis interventions.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"108 1 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143072028","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}
We study the optimal design of stress scenarios. A principal manages the unknown risk exposures of agents by asking them to report losses under hypothetical scenarios before taking remedial actions. We apply a Kalman filter to solve the learning problem, and we relate the optimal design to the risk environment, the principal's preferences, and available interventions. In a banking context, optimal capital requirements cover losses under an adverse scenario, while targeted interventions depend on covariances among residual exposures and systematic risks. Our calibration reveals that information is particularly valuable for targeted interventions as opposed to broad capital requirements.
{"title":"Designing Stress Scenarios","authors":"CECILIA PARLATORE, THOMAS PHILIPPON","doi":"10.1111/jofi.13422","DOIUrl":"https://doi.org/10.1111/jofi.13422","url":null,"abstract":"We study the optimal design of stress scenarios. A principal manages the unknown risk exposures of agents by asking them to report losses under hypothetical scenarios before taking remedial actions. We apply a Kalman filter to solve the learning problem, and we relate the optimal design to the risk environment, the principal's preferences, and available interventions. In a banking context, optimal capital requirements cover losses under an adverse scenario, while targeted interventions depend on covariances among residual exposures and systematic risks. Our calibration reveals that information is particularly valuable for targeted interventions as opposed to broad capital requirements.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"13 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143030913","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}
Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social‐investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. We identify strategies for investors to have impact when impact is difficult to measure. From the firm's perspective, increasing profitability can have greater impact than directly increasing social value. We present new empirical evidence on the social preferences of investors that demonstrates the practical relevance of our theory.
{"title":"The Allocation of Socially Responsible Capital","authors":"DANIEL GREEN, BENJAMIN N. ROTH","doi":"10.1111/jofi.13425","DOIUrl":"https://doi.org/10.1111/jofi.13425","url":null,"abstract":"Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social‐investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. We identify strategies for investors to have impact when impact is difficult to measure. From the firm's perspective, increasing profitability can have greater impact than directly increasing social value. We present new empirical evidence on the social preferences of investors that demonstrates the practical relevance of our theory.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"11 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143020485","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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