Journal of Financial Research最新文献

The literature on dual holding focuses exclusively on cases where the holder is primarily a creditor and buys the firm's stocks to reduce potential wealth transfer. However, wealth transfer is not a concern when the dual holder is a stockholder first and becomes a bondholder later. We hypothesize that the principal motive behind such dual holdings is to provide debt funding to an otherwise successful firm that cannot fund good projects because of internal capital allocation problems coupled with external capital constraints. We select samples from multinational corporations based on evidence that these firms are exposed to domestic underinvestment because they are reluctant to bring back foreign profits to avoid repatriation taxes. We choose hedge funds (HFs) as dual holders. The treatment group comprises firms where HFs are dual owners, and the control group comprises firms in which HFs own stocks only. The treatment group experiences steeper financial constraints, leading to deeper underinvestment problems and causing target firms to seek HF funding. The funding corresponds well to the amount of underinvestment. Targets improve investment efficiency by alleviating underinvestment, surpassing their predual performance and the control group's postdual performance.

I conjecture that a firm's sensitivity to industry shocks escalates its need to retain a cash buffer. Consistent with this conjecture, I find that a 1 SD increase in a firm's industry risk exposure increases cash holdings by 10%. In fact, industry risk has a greater effect on corporate cash holdings than does economywide and idiosyncratic risk in my sample. The effect of industry risk exposure on corporate cash holdings is greater for firms in highly competitive industries, as well as for firms with high leverage, a greater fraction of short-term debt, and few tangible assets.

We examine the relation between excess corporate cash holdings and equity option market liquidity from January 3, 2005 to December 31, 2019. We show that the level of cash reserve in excess of what can be captured by firm characteristics significantly explains stock option liquidity. Trading volume and option open interest increase in companies with a higher magnitude of excess cash, whereas the bid–ask spreads of stock options decline in excess cash. Our findings confirm the theoretical prediction that excess cash improves option market liquidity as it reduces adverse selection problems caused by uncertainty in firm valuations. This relation remains more pronounced with put options, out-of-the-money contracts, and short-maturity contracts. In addition, excess cash has a stronger impact on option liquidity within firms that have a greater degree of informed trading and during high-volatility periods in financial markets. Our results show that when uncertainty about firm prospects rises, excess cash becomes more valuable and affects option market liquidity.

We contrast sentiment derived from social and news media to investigate its impact across 14 international markets. We find that heightened media sentiment during nontrading periods significantly affects the next day's opening returns even after accounting for the previous-day activity. Markedly, only the US market exhibits strong reactions to social media, whereas other markets are more responsive to the news. We find that most variability in overnight returns is explained by sentiment aggregated 3 h before markets open. Our findings suggest that the overnight sentiment does not simply subsume previous-day market activity but contains additional information that helps improve predictability in return forecasting models.

Managers tend to issue equity when a firm is overvalued. Short selling is more frequent among overvalued firms. By conditioning short selling on overvaluation, we show that short selling increases leverage, lenghtens debt maturity, and speeds up adjustment to target leverage. The leverage increase is more pronounced in firms with independent boards and an increased likelihood of misvaluation, is driven by overvaluation relative to long-run value, and occurs through lower equity issuance and higher long-term debt issuance. Analyses using the exogenous shock to the short-selling environment from the US Securities and Exchange's Reg SHO pilot program suggest these results are causal.

The global financial crisis of 2007–2009 is widely regarded as the worst since the Great Depression and threatened the global financial system with a total collapse. This article distinguishes itself from the vast literature of bankruptcy, bank failure, and bank exit prediction models by introducing novel categorical parameters inspired by Switzerland's banking landscape. We evaluate data from 274 banks in Switzerland from 2007 to 2017 using generalized linear model logit and multinomial logit regressions and examine the determinants of corporate restructuring and financial distress. We complement our results with a robustness test via a Bayesian inference framework. We find that total assets and net interest margin affect bank exit and mergers and acquisitions, and that banks operating in the Zurich area have a higher likelihood of exiting and becoming takeover targets relative to banks operating in the Geneva area.

In this article, we provide new evidence on the impact of economic policy uncertainty (EPU) on asset pricing. Specifically, we find that short-term return reversals are stronger following high-EPU periods, likely due to an uncertainty-induced decrease in stock market liquidity. However, EPU does not appear to have a significant effect on accounting-based anomalies, possibly because these anomalies are not driven by stock illiquidity. Our findings suggest that EPU affects short-term asset prices mainly through stock liquidity. However, EPU may contain incremental information beyond stock liquidity. Moreover, the arrival of the latest fundamental information could significantly mitigate the effect of EPU on short-term reversals.

We present evidence that corporate connections to the media are associated with a greater likelihood of a seasoned equity offering (SEO), more negative announcement returns, and poorer long-term performance. The effect of media connections on announcement returns is more pronounced for firms with higher information asymmetry, greater financial constraints, and lower advertising expenditures. Media connections are positively associated with media coverage and sentiment before the SEO announcements. Our findings are consistent with the notion that SEO issuers use their connections with media firms to actively manage media coverage and successfully offer new equity.

We compare the responses of publicly held versus privately held community banks to the June 2016 issuance of the current expected credit loss (CECL) standard, which altered the way US banks provision for loan losses. We find that following issuance but before implementation, the relation between earnings and provisions strengthened among privately held banks but not among publicly held banks. This is consistent with US Securities and Exchange Commission regulation and market monitoring placing greater constraints on publicly held banks relative to privately held banks, preventing publicly held banks from moving toward the CECL standard early.

We find that stocks with names earlier in an alphabetic ordering exhibit greater idiosyncratic volatility. Stocks whose names are in the first 5% of an alphabetic ordering have 4.5% higher idiosyncratic volatility relative to other stocks. To address potential concerns about early-alphabet firms being different, we study name changes. Idiosyncratic volatility is 7% higher when a name change causes a stock to move into the first 5%. We attribute these results to noise traders being more active in early-alphabet stocks because of heuristic-based investing. In support of this explanation, we find that the effect is strongest during periods of high investor sentiment and among stocks with high turnover. Our results provide evidence that noise traders contribute to the idiosyncratic volatility of stocks.