Journal of Financial Research最新文献

Investing in exchange-traded funds (ETFs) rather than investing directly in the underlying securities surely prompts questions for mutual funds. Why? Examination suggests the answer is to reduce overall portfolio volatility. Actively managed open-end equity funds (OEFs) that invest in ETFs tend to take short positions in securities and to short ETFs more than other securities. Investigation of the overlap in portfolio composition between OEFs and the ETFs they hold as well as their investing positions in hedging and nonhedging ETFs separately points to the main motivation for such ETF investment—hedging.

We examine investment by different types of institutional investors in firms with strong labor unions. We find that hedge funds own a lower percentage of shares in these firms than in other firms. In contrast, passive institutional investors and institutional investors as a group own a higher percentage. Our tests suggest that the relation between unionization and hedge fund ownership is causal: When union power changes in a firm, hedge fund ownership changes in the opposite direction. Instead, passive investor holdings in unionized firms seem to be driven by other firm characteristics.

In this article, we investigate the effect of chief executive officer (CEO)–board connections on the cost of equity capital in an international setting. We find that CEO–board connections have a significant negative effect on the cost of equity. Our results are robust to alternative variable measurements, model specifications, and potential endogeneity adjustments. Examining the channel, we show that social ties reduce information asymmetry issues. We further show that firm-level operational complexities and investment intensity, as well as country-level developmental attributes and culture, moderate the association between CEO–board connections and the cost of equity capital.

We document sizable and robust excess return comovement between migration-flow receiving and sending states at the state-portfolio level. Migration comovement is not fully explained by economic fundamentals and strengthens with the size of the migration network. Consistent with the view that it is partially driven by correlated trading of a common investor base within migration networks, migration comovement a) increases substantially when there is an exogenous positive shock to migration flows, b) is greater with old firms in migration-sending states, and c) strengthens when retail investors display “old home” bias in addition to local bias.

US bank stress tests were introduced to improve the risk posture and management practices of large and complex banking institutions. We investigate whether stress-tested banks in the United States converge to each other in their levels and determinants of profitability, as well as their risk taking and systemic risk contributions. Our results are consistent with convergence in profitability, asset quality, management quality, securitization income, and income diversification of stress-tested banks. Our difference-in-differences estimation results provide causal evidence of stress tests leading to convergence in income diversification. Furthermore, stress-tested banks converge in their income diversification strategies, return volatility, default risk, leverage risk, and systemic risk contributions. This study sheds light on a situation where these banks may simultaneously have exposure to the same risks, leaving the financial system more vulnerable to a crisis as a result of the exposed risk.

We explore the relations among executive compensation, internal control quality (ICQ), and corporate social responsibility (CSR), focusing on improving the CSR outcomes of listed firms in China. Our findings are fourfold. First, we document that executive compensation and ICQ have a significant positive impact on CSR. Second, we find that executive compensation positively affects ICQ; hence, we identify ICQ as a channel that can further improve the impact of executive compensation on CSR. Third, we discover that the documented effects are stronger in state-owned firms than in non-state-owned firms. Fourth, we observe that regulatory changes have both positive and negative impacts on CSR. Our findings are less vulnerable to endogeneity and have key implications for policy makers.