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}
We find that long-term institutional investors tilt their portfolios toward firms with better Environmental, Social, and Governance (ESG) profiles, in the cross sections of both institutional investor portfolios and the ownership of firms. We test whether several theoretically motivated mechanisms can explain this relationship. Our results that long-term investors exhibit patience with firms around poor earnings announcements, but quickly sell portfolio firms after negative ES incidents, support the view that long- and short-term investors evaluate information differently. Our evidence shows that limits-to-arbitrage play a role, as we find that investors' ESG tilt weakens following regulatory shocks that shorten their horizon.
{"title":"Corporate ESG Profiles and Investor Horizons","authors":"LAURA T. STARKS, PARTH VENKAT, QIFEI ZHU","doi":"10.1111/jofi.70008","DOIUrl":"https://doi.org/10.1111/jofi.70008","url":null,"abstract":"We find that long-term institutional investors tilt their portfolios toward firms with better Environmental, Social, and Governance (ESG) profiles, in the cross sections of both institutional investor portfolios and the ownership of firms. We test whether several theoretically motivated mechanisms can explain this relationship. Our results that long-term investors exhibit patience with firms around poor earnings announcements, but quickly sell portfolio firms after negative ES incidents, support the view that long- and short-term investors evaluate information differently. Our evidence shows that limits-to-arbitrage play a role, as we find that investors' ESG tilt weakens following regulatory shocks that shorten their horizon.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"94 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145919876","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}
ROBERT F. DITTMAR, ALEX HSU, GUILLAUME ROUSSELLET, PETER SIMASEK
We examine the relative pricing of nominal Treasury bonds and Treasury inflation‐protected securities in the presence of U.S. default risk. Hedged breakeven inflation is significantly positively related to U.S. default risk, driven by correlation between shocks to default risk and both shocks to inflation swap premia and Treasury yields. To understand the mechanisms through which default risk is related to inflation swaps and sovereign yields, we estimate an affine term structure model to capture their joint dynamics. Our estimation implies that the interaction between inflation dynamics and default is the primary source of differential pricing.
{"title":"Default Risk and the Pricing of U.S. Sovereign Bonds","authors":"ROBERT F. DITTMAR, ALEX HSU, GUILLAUME ROUSSELLET, PETER SIMASEK","doi":"10.1111/jofi.70014","DOIUrl":"https://doi.org/10.1111/jofi.70014","url":null,"abstract":"We examine the relative pricing of nominal Treasury bonds and Treasury inflation‐protected securities in the presence of U.S. default risk. Hedged breakeven inflation is significantly positively related to U.S. default risk, driven by correlation between shocks to default risk and both shocks to inflation swap premia and Treasury yields. To understand the mechanisms through which default risk is related to inflation swaps and sovereign yields, we estimate an affine term structure model to capture their joint dynamics. Our estimation implies that the interaction between inflation dynamics and default is the primary source of differential pricing.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"40 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2026-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145908100","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 impact of uncertainty shocks on firm‐level economic activity depends on their origin in supply chains. Upstream (downstream) uncertainty from suppliers (customers) is associated with variability over future input (output) prices. Consequently, a real‐option production model with time‐to‐build suggests that only upstream uncertainty suppresses investment, since upstream (downstream) uncertainty affects the shorter (longer) run. Production network data show that upstream uncertainty negatively affects firm‐level outcomes. Conversely, downstream uncertainty affects firm‐level outcomes more weakly but positively. At the macro level, these two uncertainties oppositely predict aggregate growth and asset prices. Overall, downstream uncertainty has an expansionary effect, in contrast to other facets of uncertainty.
{"title":"Investment under Upstream and Downstream Uncertainty","authors":"FOTIS GRIGORIS, GILL SEGAL","doi":"10.1111/jofi.70010","DOIUrl":"https://doi.org/10.1111/jofi.70010","url":null,"abstract":"The impact of uncertainty shocks on firm‐level economic activity depends on their origin in supply chains. Upstream (downstream) uncertainty from suppliers (customers) is associated with variability over future input (output) prices. Consequently, a real‐option production model with time‐to‐build suggests that only upstream uncertainty suppresses investment, since upstream (downstream) uncertainty affects the shorter (longer) run. Production network data show that upstream uncertainty negatively affects firm‐level outcomes. Conversely, downstream uncertainty affects firm‐level outcomes more weakly but positively. At the macro level, these two uncertainties oppositely predict aggregate growth and asset prices. Overall, downstream uncertainty has an expansionary effect, in contrast to other facets of uncertainty.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"32 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145808080","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}
Borrowers' use of cashless payments improves their access to capital from FinTech lenders and predicts a lower probability of default. These relationships are stronger for cashless technologies providing more precise information, and for outflows. Cashless payment usage complements other signals of borrower quality. We rationalize these empirical findings using a framework in which borrowers signal their lower likelihood of diverting cash flows through payment technology choice, and screening accuracy is further strengthened by informational complementarities. The informational synergy we uncover provides a rationale for the joint rise of cashless payments and FinTech lending, as well as for open banking.
{"title":"FinTech Lending and Cashless Payments","authors":"PULAK GHOSH, BORIS VALLEE, YAO ZENG","doi":"10.1111/jofi.70003","DOIUrl":"https://doi.org/10.1111/jofi.70003","url":null,"abstract":"Borrowers' use of cashless payments improves their access to capital from FinTech lenders and predicts a lower probability of default. These relationships are stronger for cashless technologies providing more precise information, and for outflows. Cashless payment usage complements other signals of borrower quality. We rationalize these empirical findings using a framework in which borrowers signal their lower likelihood of diverting cash flows through payment technology choice, and screening accuracy is further strengthened by informational complementarities. The informational synergy we uncover provides a rationale for the joint rise of cashless payments and FinTech lending, as well as for open banking.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"28 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145785802","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 risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of retirement wealth declining with age—patterns markedly different from observed allocations. We use this quasi‐experiment to estimate a life‐cycle model and find a relative risk aversion of 2.5, elasticity of intertemporal substitution (EIS) of 0.25, and $160 portfolio adjustment cost. The results suggest that low levels of stock market participation in retirement accounts are due to participation frictions rather than nonstandard preferences such as loss aversion.
{"title":"What Drives Investors' Portfolio Choices? Separating Risk Preferences from Frictions","authors":"TAHA CHOUKHMANE, TIM DE SILVA","doi":"10.1111/jofi.70013","DOIUrl":"https://doi.org/10.1111/jofi.70013","url":null,"abstract":"We study the role of risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of retirement wealth declining with age—patterns markedly different from observed allocations. We use this quasi‐experiment to estimate a life‐cycle model and find a relative risk aversion of 2.5, elasticity of intertemporal substitution (EIS) of 0.25, and $160 portfolio adjustment cost. The results suggest that low levels of stock market participation in retirement accounts are due to participation frictions rather than nonstandard preferences such as loss aversion.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"15 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145770648","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}
HUNT ALLCOTT, GIOVANNI MONTANARI, BORA OZALTUN, BRANDON TAN
Growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact, suggesting that consumer impacts deserve more attention from impact investors. Existing environmental, social, and governance (ESG) and social impact ratings are essentially unrelated to our economically grounded measures.
{"title":"An Economic View of Corporate Social Impact","authors":"HUNT ALLCOTT, GIOVANNI MONTANARI, BORA OZALTUN, BRANDON TAN","doi":"10.1111/jofi.70004","DOIUrl":"https://doi.org/10.1111/jofi.70004","url":null,"abstract":"Growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact, suggesting that consumer impacts deserve more attention from impact investors. Existing environmental, social, and governance (ESG) and social impact ratings are essentially unrelated to our economically grounded measures.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"13 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145759701","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 annual proportion of U.S. public firms that reported a financial covenant violation fell roughly 70% between 1997 and 2019. To understand this trend, we develop an estimable model of covenant design that depends on the ability to differentiate between distressed and nondistressed borrowers and the relative costs associated with screening incorrectly. We find that the drop in violations is best explained by an increased willingness to forgo early detection of distressed borrowers in exchange for fewer inconsequential violations, which we attribute largely to a shift in the composition of public borrowers and partly to heightened investor sentiment during the 2010s.
{"title":"Losing Control? The Two-Decade Decline in Loan Covenant Violations","authors":"THOMAS P. GRIFFIN, GREG NINI, DAVID C. SMITH","doi":"10.1111/jofi.70005","DOIUrl":"https://doi.org/10.1111/jofi.70005","url":null,"abstract":"The annual proportion of U.S. public firms that reported a financial covenant violation fell roughly 70% between 1997 and 2019. To understand this trend, we develop an estimable model of covenant design that depends on the ability to differentiate between distressed and nondistressed borrowers and the relative costs associated with screening incorrectly. We find that the drop in violations is best explained by an increased willingness to forgo early detection of distressed borrowers in exchange for fewer inconsequential violations, which we attribute largely to a shift in the composition of public borrowers and partly to heightened investor sentiment during the 2010s.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"16 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145753025","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 exploit an episode of plausibly random debt discharge due to the loss of paperwork for thousands of defaulted borrowers to examine the effects of private student debt relief on borrower outcomes. We find that borrowers who receive debt relief (treated) experience declines in debt balances and delinquency rates on other accounts, and increases in mobility and income relative to those who bear the costs of default like wage garnishment and collections (control). Borrowers in both groups contribute to our findings through different mechanisms. While our estimates may not directly apply to blanket student loan forgiveness, they speak to the benefits of forgiveness in reducing the consequences of debt burden for distressed borrowers.
{"title":"Second Chance: Life with Less Student Debt","authors":"MARCO DI MAGGIO, ANKIT KALDA, VINCENT YAO","doi":"10.1111/jofi.70002","DOIUrl":"https://doi.org/10.1111/jofi.70002","url":null,"abstract":"We exploit an episode of plausibly random debt discharge due to the loss of paperwork for thousands of defaulted borrowers to examine the effects of private student debt relief on borrower outcomes. We find that borrowers who receive debt relief (treated) experience declines in debt balances and delinquency rates on <i>other</i> accounts, and increases in mobility and income relative to those who bear the costs of default like wage garnishment and collections (control). Borrowers in both groups contribute to our findings through different mechanisms. While our estimates may not directly apply to blanket student loan forgiveness, they speak to the benefits of forgiveness in reducing the consequences of debt burden for distressed borrowers.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"112 1","pages":""},"PeriodicalIF":8.0,"publicationDate":"2025-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145753120","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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