Journal of Financial Research最新文献

We examine the impact of product market threats on firms' leasing decisions. Using fluidity as a measure of these threats, our analysis shows that product market threats significantly increase firms' reliance on leases. This effect is more pronounced for firms with greater financial constraints, cash-flow volatility, predation and obsolescence risk, information asymmetries, and weak corporate governance. We also show that the economic benefits of leasing to counter competitive threats are substantial and diverse, including capturing growth, maintaining profitability, and mitigating inefficient capital allocation. These findings suggest that firms strategically use leasing as a defense mechanism against product market threats.

We investigate the effect of bond covenants on the speed of corporate capital structure adjustment. Based on manually collected bond covenant information from publicly listed Chinese firms between 2007 and 2019, we construct an index that measures the intensity of corporate bond covenants. Our results show that the greater the covenant intensity index of a firm's debt covenants, the faster the capital structure adjustment. Option covenants, restrictive asset transfer covenants, restrictive investment covenants, and event-driven covenants all have a positive and significant association with the speed of capital structure adjustment, whereas no such effect is observed for financing covenants and repayment arrangement covenants. Furthermore, we examine the direction of adjustment and adjustment method, and demonstrate that bond covenants promote an upward adjustment in a firm's capital structure by increasing debt financing. An analysis of heterogeneity effects reveals that the positive relation between the intensity of bond covenants and speed of capital structure adjustment is more pronounced in state-owned companies and companies headquartered in areas with higher legal standards. Finally, we show that information transparency, internal control, and environmental, social, and governance (ESG) performance are channels through which bond covenants affect the speed of capital structure adjustment.

We investigate the causal impact of short-sale constraints on the idiosyncratic volatility (IVOL) puzzle, where high-IVOL stocks yield lower future returns. We leverage two opposing exogenous shocks to short-sale constraints: (1) 2005 Regulation SHO, which relaxes constraints for pilot stocks, and (2) 2003 Jobs and Growth Tax Relief Reconciliation Act (JGTRRA), which tightens constraints during dividend record months. We find that short-sale constraints significantly affect IVOL pricing: Regulation SHO weakens the IVOL effect for pilot stocks, whereas JGTRRA strengthens it after dividend record months. These findings underscore the importance of short-sale constraints in understanding the IVOL puzzle.

Using a sample of 94,697 US firm-year observations from 1994 to 2017, we document that annual report complexity is positively and significantly associated with a firm's operating lease ratio. In addition, we find that financially constrained and weakly governed firms with complex financial reports lease more. Finally, by employing a difference-in-differences method with the Plain Writing Act 2010 and a regression discontinuity design with eXtensible Business Reporting Language (XBRL) adoption, we find that the positive association is highly likely to be causal. Overall, our study shows that firms with linguistically complex annual reports strategically choose to use leasing as an alternative source of funding.

How do borrowers prioritize financial versus psychological costs of holding debt? We explore these trade-offs using repayment data for 3,705 borrowers with an Islamic housing mortgage in Pakistan. The product allows borrowers to make early payments. Around 40% of borrowers in our sample make early payments, leading to an average cost of PKR 247,707 ($2,890 USD). We develop a new model of consumer hedonics to explain these results, and rule out religion, commitment devices, and cost misunderstanding as complete explanations. These findings suggest that there is a psychological benefit to decreasing debt, even if an account is not closed fully.

We use exogenous changes in creditor rights from staggered enactments of anti-recharacterization laws to show that enhanced creditor rights lead to economically significant increases in dividend payments. This impact is more pronounced for firms that are financially constrained, poorly governed, informationally opaque, and prone to agency problems. Our detailed loan-contract results show that stronger creditor rights provide greater access to credit markets, and it is through this channel that firms are able to redirect more funds toward shareholder payouts. Overall, our findings suggest that improving the rights of one stakeholder can create positive spillover effects for other stakeholders.

Option prices can predict stock returns. Previous studies suggest that this is because option traders have private information about the fundamentals of the stock. We show another reason is that option traders can anticipate the reversal of nonfundamental shocks to stock price. We use S&P 500 index inclusion as an example of a nonfundamental shock. We document that index inclusion increases the implied volatility skew of added stocks, which then predicts the reversal of the stock price shock in the following months.

In this article, we examine the impact of academic CEOs (i.e., CEOs with academic experience) on corporate innovation. We find that firms managed by academic CEOs have strong aspirations for innovation and generate more patents with higher citations. We employ exogenous CEO turnover to alleviate endogeneity concerns. In addition, whereas corporate innovation gradually increases following the entry of new academic CEOs, there is a clear decrease in innovation output after the departure of academic CEOs. This net effect concentrates in innovation-intensive industries. Moreover, academic CEOs enhance innovation by leveraging their network with academic community and ability to secure government funding.

Using data on large loans to US firms, we show that higher economic freedom in borrowers' headquarters states reduces the cost of bank credit. A one standard deviation increase in economic freedom lowers loan spreads by 12.38 basis points ($1.5 million interest savings for the average loan). We also provide evidence supporting the economic mechanism by which lenders view economic freedom as enhancing borrowers' ability to capitalize on investment and growth opportunities. The main drivers of this effect are freedom from government spending and taxation, while labor market freedom particularly benefits smaller firms and those in high economic growth potential states. Furthermore, higher economic freedom is linked to longer loan maturities, reduced fees, and looser general covenants.

Matching rights provisions have become ubiquitous in merger agreements in recent years prompting calls for an evaluation of their usage. Using a sample of 2,640 M&A agreements announced between 2003 and 2018, we conduct the first comprehensive analysis of the impact of matching rights provisions on initial and final target premiums, controlling for other merger provisions, deal and firm characteristics. We do not find evidence to suggest that the indiscriminate usage of matching rights in the 2011–2018 period has been detrimental to target shareholders. Moreover, for the 2003–2010 period, we find a positive association between matching rights and target premiums. We also find a positive or non-negative impact on target premiums for different subsamples of potential concern based on selling method, bidder type, termination fee size, and information asymmetry. Finally, we do not find evidence that matching rights deter competing bids. Overall, the usage of matching rights appears consistent with efficient contracting, assuaging concerns raised by Restrepo and Subramanian (2017).