Green finance—including environmental, social, and governance investing and sustainable finance regulations—is widespread, but can it substitute for carbon pricing in fighting climate change? In a unified model, I show that (i) when carbon prices reflect the social cost of carbon, green finance should not be used; (ii) when carbon prices are too low, green finance can implement the social optimum if each firm's cost of capital can be set to its sustainable discount rate , which increases with the ratio of carbon emissions to firm value. I provide calibrations, analyze stranded assets, and present implementations through subsidies or preferential financing for green firms.
{"title":"Carbon Pricing versus Green Finance","authors":"LASSE HEJE PEDERSEN","doi":"10.1111/jofi.70022","DOIUrl":"https://doi.org/10.1111/jofi.70022","url":null,"abstract":"Green finance—including environmental, social, and governance investing and sustainable finance regulations—is widespread, but can it substitute for carbon pricing in fighting climate change? In a unified model, I show that (i) when carbon prices reflect the social cost of carbon, green finance should not be used; (ii) when carbon prices are too low, green finance can implement the social optimum if each firm's cost of capital can be set to its <jats:italic>sustainable discount rate</jats:italic> , which increases with the ratio of carbon emissions to firm value. I provide calibrations, analyze stranded assets, and present implementations through subsidies or preferential financing for green firms.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"314 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146146026","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 D. KEPLER, CHARLES G. MCCLURE, CHRISTOPHER R. STEWART
Antitrust laws mandate review of mergers and acquisitions (M&As) that exceed an asset size threshold based on accounting standards that exclude most intangible capital. We show that this exclusion leads to thousands of intangible-intensive M&As being nonreportable. Acquirers in nonreportable deals achieve higher equity values and price markups, especially when consolidating product markets. Furthermore, nonreportable pharmaceutical deals are three times more likely to involve overlapping drug projects, which are subsequently 40% more likely to be terminated. Our results suggest that the growth of intangible assets may exacerbate market power through nonreportable consolidation of the sectors most concerning for consumers.
{"title":"Competition Enforcement and Accounting for Intangible Capital","authors":"JOHN D. KEPLER, CHARLES G. MCCLURE, CHRISTOPHER R. STEWART","doi":"10.1111/jofi.70028","DOIUrl":"https://doi.org/10.1111/jofi.70028","url":null,"abstract":"Antitrust laws mandate review of mergers and acquisitions (M&As) that exceed an asset size threshold based on accounting standards that exclude most intangible capital. We show that this exclusion leads to thousands of intangible-intensive M&As being nonreportable. Acquirers in nonreportable deals achieve higher equity values and price markups, especially when consolidating product markets. Furthermore, nonreportable pharmaceutical deals are three times more likely to involve overlapping drug projects, which are subsequently 40% more likely to be terminated. Our results suggest that the growth of intangible assets may exacerbate market power through nonreportable consolidation of the sectors most concerning for consumers.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"17 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146129247","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}
Conventional wisdom holds that lowering a home country's interest rate relative to another's will depreciate the domestic currency. We document that, at business‐cycle frequencies, U.S. forward guidance monetary policy easings had the opposite effect during the Great Recession. We attribute this effect to calendar‐based forward guidance that signaled economic weakness, resulting in a “flight‐to‐safety” effect and lower expected U.S. inflation. We also document cross‐currency heterogeneity: a surprise U.S. rate cut induced a larger appreciation of the dollar against currencies that typically depreciate more when the world economy is contracting. We build a model that can reconcile these findings.
{"title":"The Dollar during the Great Recession: The Information Channel of U.S. Monetary Policy and the “Flight to Safety”","authors":"VANIA STAVRAKEVA, JENNY TANG","doi":"10.1111/jofi.70025","DOIUrl":"https://doi.org/10.1111/jofi.70025","url":null,"abstract":"Conventional wisdom holds that lowering a home country's interest rate relative to another's will depreciate the domestic currency. We document that, at business‐cycle frequencies, U.S. forward guidance monetary policy easings had the opposite effect during the Great Recession. We attribute this effect to calendar‐based forward guidance that signaled economic weakness, resulting in a “flight‐to‐safety” effect and lower expected U.S. inflation. We also document cross‐currency heterogeneity: a surprise U.S. rate cut induced a larger appreciation of the dollar against currencies that typically depreciate more when the world economy is contracting. We build a model that can reconcile these findings.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"38 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146056050","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 role of asset revaluation in the monetary transmission mechanism. We build an analytical heterogeneous-agents model with two main ingredients: (i) rare disasters and (ii) heterogeneous beliefs. The model captures time-varying risk premia and precautionary savings in a setting that nests the textbook New Keynesian model. The model generates large movements in asset prices after a monetary shock but these movements can be neutral on real variables. Real effects depend on the redistribution among agents with heterogeneous precautionary motives. In quantitative analysis, we find that this channel can account for a large fraction of the transmission to aggregate consumption.
{"title":"Monetary Policy and Wealth Effects: The Role of Risk and Heterogeneity","authors":"NICOLAS CARAMP, DEJANIR H. SILVA","doi":"10.1111/jofi.70021","DOIUrl":"https://doi.org/10.1111/jofi.70021","url":null,"abstract":"We study the role of asset revaluation in the monetary transmission mechanism. We build an analytical heterogeneous-agents model with two main ingredients: (i) rare disasters and (ii) heterogeneous beliefs. The model captures time-varying risk premia and precautionary savings in a setting that nests the textbook New Keynesian model. The model generates large movements in asset prices after a monetary shock but these movements can be neutral on real variables. Real effects depend on the redistribution among agents with heterogeneous precautionary motives. In quantitative analysis, we find that this channel can account for a large fraction of the transmission to aggregate consumption.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"41 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146048677","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}
GABRIEL JIMÉNEZ, DMITRY KUVSHINOV, JOSÉ-LUIS PEYDRÓ, BJÖRN RICHTER
We show that a U-shaped monetary rate path increases banking crisis risk, via credit and asset price cycles, analyzing 17 countries over 150 years. Rate hikes (raw or instrumented) increase crisis risk, but only if preceded by prolonged cuts. These patterns are unique to banking crises, unlike noncrisis recessions. Regarding the mechanism, prolonged cuts raise the likelihood of large credit and asset price booms, consistent with higher credit supply and risk-taking. Subsequent hikes strongly reduce credit and asset prices, and increase banks' realized credit risk, rather than interest rate risk. We find consistent results in administrative loan-level data for Spain.
{"title":"Monetary Policy, Inflation, and Crises: Evidence from History and Administrative Data","authors":"GABRIEL JIMÉNEZ, DMITRY KUVSHINOV, JOSÉ-LUIS PEYDRÓ, BJÖRN RICHTER","doi":"10.1111/jofi.70023","DOIUrl":"https://doi.org/10.1111/jofi.70023","url":null,"abstract":"We show that a U-shaped monetary rate path increases banking crisis risk, via credit and asset price cycles, analyzing 17 countries over 150 years. Rate hikes (raw or instrumented) increase crisis risk, but only if preceded by prolonged cuts. These patterns are unique to banking crises, unlike noncrisis recessions. Regarding the mechanism, prolonged cuts raise the likelihood of large credit and asset price booms, consistent with higher credit supply and risk-taking. Subsequent hikes strongly reduce credit and asset prices, and increase banks' realized credit risk, rather than interest rate risk. We find consistent results in administrative loan-level data for Spain.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"29 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146048675","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}
Amanda Rae Heitz, Christopher Martin, Alexander Ufier
Using proprietary transaction-level data on nonsyndicated construction loans, we provide some of the first empirical evidence on the drivers and consequences of bank monitoring through on-site inspections. Banks trade off monitoring intensity with favorable origination terms. Monitoring intensity escalates in response to local economic downturns or the bank's financial instability. Borrowers with negative inspection reports have more draw requests denied, suggesting that monitoring outcomes impact credit decisions. Both the occurrence and threat of increased inspection frequency correspond to reduced defaults. Overall, our results provide empirical support for a substantial body of theoretical literature on bank monitoring.
{"title":"Bank Monitoring with On-Site Inspections","authors":"Amanda Rae Heitz, Christopher Martin, Alexander Ufier","doi":"10.1111/jofi.70026","DOIUrl":"https://doi.org/10.1111/jofi.70026","url":null,"abstract":"Using proprietary transaction-level data on nonsyndicated construction loans, we provide some of the first empirical evidence on the drivers and consequences of bank monitoring through on-site inspections. Banks trade off monitoring intensity with favorable origination terms. Monitoring intensity escalates in response to local economic downturns or the bank's financial instability. Borrowers with negative inspection reports have more draw requests denied, suggesting that monitoring outcomes impact credit decisions. Both the occurrence and threat of increased inspection frequency correspond to reduced defaults. Overall, our results provide empirical support for a substantial body of theoretical literature on bank monitoring.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"70 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146021874","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 link between corporate bond credit spreads and secondary market illiquidity in the cross section has grown stronger since 2005, resulting in a higher liquidity component in credit spreads. Using U.S. investor holdings data, we show that short-term investors (e.g., mutual funds/exchange-traded funds [ETFs]) increase trading activities in the secondary market, amplifying the effect of secondary market frictions on prices. We provide a model featuring heterogeneous investors with different trading needs and heterogeneous bonds to investigate the impact of the rapid-growing mutual fund/ETF sector on the corporate bond market. We find the change in investor composition can quantitatively explain the aggregate trend.
{"title":"Investor Composition and the Liquidity Component in the U.S. Corporate Bond Market","authors":"JIAN LI, HAIYUE YU","doi":"10.1111/jofi.70024","DOIUrl":"https://doi.org/10.1111/jofi.70024","url":null,"abstract":"The link between corporate bond credit spreads and secondary market illiquidity in the cross section has grown stronger since 2005, resulting in a higher liquidity component in credit spreads. Using U.S. investor holdings data, we show that short-term investors (e.g., mutual funds/exchange-traded funds [ETFs]) increase trading activities in the secondary market, amplifying the effect of secondary market frictions on prices. We provide a model featuring heterogeneous investors with different trading needs and heterogeneous bonds to investigate the impact of the rapid-growing mutual fund/ETF sector on the corporate bond market. We find the change in investor composition can quantitatively explain the aggregate trend.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"142 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146021875","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 unique, daily, account-level data, we investigate deposit outflows and inflows in a distressed bank. We observe an outflow of uninsured depositors following bad regulatory news. Both regular and temporary deposit insurance reduce outflows. We provide important new evidence that, simultaneous with deposit outflows, deposit inflows are first order. Uninsured deposit outflows were largely offset with new insured deposit inflows as the bank approached failure, with the bank increasing term deposit rates. This phenomenon holds in a large sample of banks that faced regulatory action, suggesting that insured deposit inflows are an important mechanism that weakens depositor discipline.
{"title":"Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance","authors":"CHRISTOPHER MARTIN, MANJU PURI, ALEXANDER UFIER","doi":"10.1111/jofi.70007","DOIUrl":"https://doi.org/10.1111/jofi.70007","url":null,"abstract":"Using unique, daily, account-level data, we investigate deposit outflows and inflows in a distressed bank. We observe an <i>outflow</i> of uninsured depositors following bad regulatory news. Both regular and temporary deposit insurance reduce outflows. We provide important new evidence that, simultaneous with deposit outflows, deposit <i>inflows</i> are first order. Uninsured deposit outflows were largely offset with new insured deposit inflows as the bank approached failure, with the bank increasing term deposit rates. This phenomenon holds in a large sample of banks that faced regulatory action, suggesting that insured deposit inflows are an important mechanism that weakens depositor discipline.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"31 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146005704","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 data on Internet news reading, we measure fund‐level attention to both aggregate and firm‐specific news and relate it to fund portfolio allocation decisions. In the time series, we find that funds shift attention toward macroeconomic news during periods of high aggregate volatility. Those funds that exhibit stronger attention‐reallocation patterns earn higher future returns. In the cross‐section of fund portfolios, fund attention is positively related to stock holdings. Furthermore, fund attention to a stock increases the value‐add of that position to the fund's performance. This relationship is stronger using fund attention to more value‐relevant news articles.
{"title":"Institutional Investor Attention","authors":"ALAN KWAN, YUKUN LIU, BEN MATTHIES","doi":"10.1111/jofi.70009","DOIUrl":"https://doi.org/10.1111/jofi.70009","url":null,"abstract":"Using data on Internet news reading, we measure fund‐level attention to both aggregate and firm‐specific news and relate it to fund portfolio allocation decisions. In the time series, we find that funds shift attention toward macroeconomic news during periods of high aggregate volatility. Those funds that exhibit stronger attention‐reallocation patterns earn higher future returns. In the cross‐section of fund portfolios, fund attention is positively related to stock holdings. Furthermore, fund attention to a stock increases the value‐add of that position to the fund's performance. This relationship is stronger using fund attention to more value‐relevant news articles.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"38 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145986251","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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