Journal of Financial Research最新文献

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.

We investigate the impact of the Dodd–Frank Act (DFA) on the credit risk behavior of complex bank holding companies (BHCs). Specifically, we assess the effectiveness of the DFA in reducing the credit riskiness of complex banks. Consistent with the moral hazard hypothesis, we find that complex BHCs affected by the DFA increase their credit risk. We argue that possible explanations are that BHCs decreased their lending portfolio quality, loan monitoring, and strength and independence of the risk management function after the DFA. The results are robust to endogeneity concerns, different sample selection criteria, various model and treatment specifications, and placebo tests.

Firms managed by the scions of founders continue to be prevalent in the United States despite the increase in shareholder activism over the last few decades, calling into question the argument that such organizational structures reduce firm value. Founder-family successions are rare in high-growth industries where the benefits of selecting from a larger pool of managers is significant. Rather, they tend to happen in low-growth industries, in manufacturing/retail firms. Once we account for the differences in firm characteristics, we do not find that founder-family successions reduce firm value. We explore a mechanism that compensates for the costs of choosing from a smaller pool of managers and document evidence consistent with family firms benefiting from improved labor relations.

Using a panel smooth transition regression framework on a new proxy of the business cycle (BC) index and quarterly data of US bank holding companies from 1993Q1 to 2020Q1, our results provide empirical support for the theory that the BC has a nonlinear effect on liquidity creation. We find a positive and highly significant nonlinear effect of the BC on liquidity creation, which not only supports the pro-cyclicality of liquidity creation but also improves the liquidity creation estimation compared to previous studies. The results are robust to different proxies of the BC and model specifications. We also document that US bank holding companies create liquidity more during the expansion phase (normal times) than during the recession phase (crisis times) of the BC, suggesting an asymmetrical effect of BC changes on liquidity creation. Our findings have important implications for financial market participants by suggesting that banks should keep alternative sources of funding on hand during the BC recession phase. Insights from our study also provide policy implications for central banks and prudent supervisors to consider when incentivizing banks, for instance, by lowering regulatory requirements, adjusting the policy rate, or implementing any other quantitative easing policy during the BC recession phase to keep the financial system efficient.