This paper examines venture capital's (VC) role in the geographic clustering of high-growth startups. We exploit a rule change that disproportionately impacted U.S. regions that historically lacked VC financing via a restriction of banks to invest in the asset class. A one-standard-deviation increase in VCs' exposure to the rule led to a 20% decline in fund size and a 10% decrease in the likelihood of raising a follow-on fund. Startups were not wholly cushioned: financing and valuations declined. Startups also moved out of impacted states after the rule change, likely exacerbating existing geographic disparity in entrepreneurship.
{"title":"Venture Capital and Startup Agglomeration","authors":"JUN CHEN, MICHAEL EWENS","doi":"10.1111/jofi.13451","DOIUrl":"https://doi.org/10.1111/jofi.13451","url":null,"abstract":"This paper examines venture capital's (VC) role in the geographic clustering of high-growth startups. We exploit a rule change that disproportionately impacted U.S. regions that historically lacked VC financing via a restriction of banks to invest in the asset class. A one-standard-deviation increase in VCs' exposure to the rule led to a 20% decline in fund size and a 10% decrease in the likelihood of raising a follow-on fund. Startups were not wholly cushioned: financing and valuations declined. Startups also moved out of impacted states after the rule change, likely exacerbating existing geographic disparity in entrepreneurship.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"148 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143767126","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}
The reordering of transactions from “high-to-low” is a controversial bank practice thought to maximize fees paid by low-income customers on overdrawn accounts. We exploit a series of class-action lawsuits that mandated that some banks cease the practice. Using alternative credit bureau data, we find that after banks cease high-to-low reordering, low-income individuals reduce payday borrowing, increase consumption, realize long-term improvements in financial health, and gain access to lower-cost loans in the traditional financial system. These findings suggest that aggressive bank practices can create demand for alternative financial services and highlight an important link between the traditional and alternative financial systems.
{"title":"In the Red: Overdrafts, Payday Lending, and the Underbanked","authors":"MARCO DI MAGGIO, ANGELA MA, EMILY WILLIAMS","doi":"10.1111/jofi.13447","DOIUrl":"https://doi.org/10.1111/jofi.13447","url":null,"abstract":"The reordering of transactions from “high-to-low” is a controversial bank practice thought to maximize fees paid by low-income customers on overdrawn accounts. We exploit a series of class-action lawsuits that mandated that some banks cease the practice. Using alternative credit bureau data, we find that after banks cease high-to-low reordering, low-income individuals reduce payday borrowing, increase consumption, realize long-term improvements in financial health, and gain access to lower-cost loans in the traditional financial system. These findings suggest that aggressive bank practices can create demand for alternative financial services and highlight an important link between the traditional and alternative financial systems.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"19 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143745276","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}
JOHN WILLIAM HATFIELD, SCOTT DUKE KOMINERS, RICHARD LOWERY
High commissions in the U.S. residential real estate agency market pose a puzzle for economic theory because brokerage is not a concentrated industry. We model brokered markets as a game in which agents post prices for customers and then choose which other agents to work with. We show that there exists an equilibrium in which each agent conditions working with other agents on those agents' posted prices. Prices can therefore be meaningfully higher than the competitive level (for a fixed discount factor), regardless of the number of agents. Thus, brokered markets can remain uncompetitive even with low concentration and easy entry.
{"title":"Collusion in Brokered Markets","authors":"JOHN WILLIAM HATFIELD, SCOTT DUKE KOMINERS, RICHARD LOWERY","doi":"10.1111/jofi.13432","DOIUrl":"https://doi.org/10.1111/jofi.13432","url":null,"abstract":"High commissions in the U.S. residential real estate agency market pose a puzzle for economic theory because brokerage is not a concentrated industry. We model brokered markets as a game in which agents post prices for customers and then choose which other agents to work with. We show that there exists an equilibrium in which each agent conditions working with other agents on those agents' posted prices. Prices can therefore be meaningfully higher than the competitive level (for a fixed discount factor), regardless of the number of agents. Thus, brokered markets can remain uncompetitive even with low concentration and easy entry.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"51 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143653361","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}
{"title":"Report of the Editor of The Journal of Finance for the Year 2024","authors":"ANTOINETTE SCHOAR","doi":"10.1111/jofi.13435","DOIUrl":"https://doi.org/10.1111/jofi.13435","url":null,"abstract":"","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"80 2","pages":"1313-1322"},"PeriodicalIF":7.6,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143638591","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}
{"title":"BRATTLE GROUP AND DIMENSIONAL FUND ADVISORS PRIZES FOR 2024","authors":"","doi":"10.1111/jofi.13434","DOIUrl":"https://doi.org/10.1111/jofi.13434","url":null,"abstract":"","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"80 2","pages":"655"},"PeriodicalIF":7.6,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143638701","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}
{"title":"Report of the EST and of the 2025 Annual Membership Meeting","authors":"","doi":"10.1111/jofi.13433","DOIUrl":"https://doi.org/10.1111/jofi.13433","url":null,"abstract":"","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"80 2","pages":"1323-1325"},"PeriodicalIF":7.6,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143638590","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 analyze how a profit-maximizing proxy advisor designs vote recommendations and research reports. The advisor benefits from producing informative, unbiased reports, but only partially informative recommendations, biased against the a priori likely alternative. Such recommendations induce close votes, increasing controversy and thereby the relevance and value of proxy advice. Our results suggest shifting from an exclusive emphasis on recommendations, highlighting the importance of both reports and recommendations in proxy advisors' information provision. They rationalize the one-size-fits-all approach and help reinterpret empirical patterns of voting behavior, suggesting that proxy advisors' recommendations may not be a suitable benchmark for evaluating shareholders' votes.
{"title":"Creating Controversy in Proxy Voting Advice","authors":"ANDREY MALENKO, NADYA MALENKO, CHESTER SPATT","doi":"10.1111/jofi.13438","DOIUrl":"https://doi.org/10.1111/jofi.13438","url":null,"abstract":"We analyze how a profit-maximizing proxy advisor designs vote recommendations and research reports. The advisor benefits from producing informative, unbiased reports, but only partially informative recommendations, biased against the a priori likely alternative. Such recommendations induce close votes, increasing controversy and thereby the relevance and value of proxy advice. Our results suggest shifting from an exclusive emphasis on recommendations, highlighting the importance of both reports and recommendations in proxy advisors' information provision. They rationalize the one-size-fits-all approach and help reinterpret empirical patterns of voting behavior, suggesting that proxy advisors' recommendations may not be a suitable benchmark for evaluating shareholders' votes.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"13 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143635275","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}
Theory posits that when managers anticipate excess capacity, average q becomes a biased estimator of marginal q as the potential for underutilizing new capital reduces the marginal benefit of investing. After correcting for this source of measurement error, the explanatory power of Tobin's q substantially improves in time‐series and cross‐sectional regressions as well as in out‐of‐sample tests. These findings, together with a secular erosion in capacity utilization, help explain why corporate investment rates have been declining for decades despite average q increasing significantly. Our analysis indicates that economic rigidities have contributed to the persistent erosion in capacity utilization.
{"title":"Excess Capacity, Marginal q, and Corporate Investment","authors":"GUSTAVO GRULLON, DAVID L. IKENBERRY","doi":"10.1111/jofi.13439","DOIUrl":"https://doi.org/10.1111/jofi.13439","url":null,"abstract":"Theory posits that when managers anticipate excess capacity, average <jats:italic>q</jats:italic> becomes a biased estimator of marginal <jats:italic>q</jats:italic> as the potential for underutilizing new capital reduces the marginal benefit of investing. After correcting for this source of measurement error, the explanatory power of Tobin's <jats:italic>q</jats:italic> substantially improves in time‐series and cross‐sectional regressions as well as in out‐of‐sample tests. These findings, together with a secular erosion in capacity utilization, help explain why corporate investment rates have been declining for decades despite average <jats:italic>q</jats:italic> increasing significantly. Our analysis indicates that economic rigidities have contributed to the persistent erosion in capacity utilization.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"92 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143607825","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}
I study how the secular decline in interest rates affects banks' intermediation spreads and credit supply. Following a permanent decrease in rates, bank lending may rise initially but contracts in the long run. As lower rates compress deposit spreads even well above the zero lower bound, banks' retained earnings, equity, and lending fall until loan spreads have risen enough to offset the reduction in deposit spreads. A higher inflation target can support bank lending at the cost of higher liquidity premia. I find support for the model's predictions in U.S. aggregate and bank-level data.
{"title":"Banks, Low Interest Rates, and Monetary Policy Transmission","authors":"OLIVIER WANG","doi":"10.1111/jofi.13436","DOIUrl":"https://doi.org/10.1111/jofi.13436","url":null,"abstract":"I study how the secular decline in interest rates affects banks' intermediation spreads and credit supply. Following a permanent decrease in rates, bank lending may rise initially but contracts in the long run. As lower rates compress deposit spreads even well above the zero lower bound, banks' retained earnings, equity, and lending fall until loan spreads have risen enough to offset the reduction in deposit spreads. A higher inflation target can support bank lending at the cost of higher liquidity premia. I find support for the model's predictions in U.S. aggregate and bank-level data.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"87 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143582570","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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