FINANCIAL REVIEW最新文献

Using the 2007–2009 financial crisis as a quasi-natural experiment, we show that banks with investors holding simultaneously both equity and bonds (dual-holders) exhibit lower risk and superior performance. Dual-holders' influence is higher in more opaque banks, indicating that the mechanism of transmission is through a decrease in information asymmetry and a reduction in debtholder–shareholder conflict. This effect translates into higher unconditional and risk-adjusted stock returns. These economically large results show that a market mechanism implemented by outside investors is strongly effective in mitigating excessive risk taking by banks thus providing important normative implications for the stability of financial systems.

The Federal Reserve's impact on corporate investments varies with the type of monetary shock. From a conventional standpoint, contractionary monetary shocks trigger a rise in financing costs that significantly reduce investment. Such effects are predicted by the widely investigated monetary policy channels. However, we highlight informational circumstances under which monetary contraction reduces uncertainty and incentivizes a rise in investment. These effects arise when monetary tightening conveys a positive assessment of the macroeconomic outlook by the Fed. We further show that the positive effect of contractionary Fed information shocks on investment is largely driven by these shocks’ ability to reduce uncertainty.

We evidence that cryptocurrencies have a higher probability of crashes than equity indices, although such crashes are of shorter duration. Commonality of crash risk between cryptocurrency and equity markets occur in approximately 80% of the periods examined. Further, recently evolved cryptocurrency uncertainty indices are more relevant for predicting co-crash behavior than economic policy uncertainty. Results are consistent with cryptocurrencies being a growing source of financial instability.

We hypothesise that societal norms cause institutional investors to discriminate against polluters. Consistent with this hypothesis, we document relatively lower institutional ownership for the most polluting firms in the United States. Institutional discrimination against polluters increases over 1987–2018, in line with increasing environmental awareness. Institutions are primarily averse to investments in dioxin emitters. Institutions that prioritize portfolio performance are less sensitive to societal norms against polluters, as are institutions with shorter investment horizons and more aggressive trading strategies. Lastly, we test whether investor discrimination affects polluter equity valuations and creates systematic trading opportunities, but find no convincing evidence of a polluter return premium.

We examine price changes associated with mergers and acquisitions (M&As) in the U.S. property-liability insurance industry. We classify M&As into intrastate M&As, where the acquirer and the target previously operated in the same local market, and interstate M&As, where the acquirer and the target operated in different local markets. We show that insurance prices of acquiring firms decrease following interstate M&As, whereas there is no significant effect of M&As on price changes in intrastate consolidation. Using an interaction term between interstate M&A indicators and acquirers’ efficiency, we find evidence to suggest that acquirers’ efficiency can explain the price decrease in interstate M&As. It appears that acquirers’ efficiency can be passed on to consumers, and interstate M&As have a beneficial effect on consumers in the form of reduced prices.

We investigate the effects of using different sources of investment leverage, that is, securities with embedded leverage and traditional margin accounts, on the portfolio performance of retail investors, recognizing that these effects may be conditional on investor attention. We find that investors who trade on margin underperform those who do not have margin accounts; we also find that investors trading securities with embedded leverage show even poorer performance than investors trading on margin. The negative effect of leverage usage, however, decreases with greater investor attention, measured by portfolio monitoring frequency. Results suggest that more attentive investors gain more from using investment leverage.

We investigate the effect of limited liability on firm investment. We find firms that intend to borrow but have higher risk have a greater probability of changing to limited liability. With propensity score matching, difference-in-differences analysis, and switching regressions with an endogenous switching model, we find that, after the liability regime change, firm investment aggressiveness decreases but on a lesser level than the over-time change for firms using unlimited liability. We also find there is improvement in investment efficiency and return on invested capital. These results suggest that limited liability encourages firm investment and leads to more effective investment policies.

We study the effects of COVID-19 intensity on equity market liquidity across U.S. states. We exploit cross-sectional variation in cases and deaths to investigate any association with the deterioration of stock liquidity of firms whose headquarters or operations are in the corresponding state(s). Our motivation stems from several underlying economic channels such as order processing costs, inventory costs, and adverse selection costs. We find strong negative relations between pandemic intensity and various intra-day liquidity measures. Our results are more pronounced for firms operating in states with more stringent containment and health measures and within industries with greater risk exposure.

I present an asymmetric information model of financial markets in which there is uncertainty and learning not only about fundamentals but also about the proportion of informed-to-noise traders in the market. Extreme news leads to an increase in both types of uncertainty, while it decreases price informativeness. Uncertainty about the market composition constitutes a type of liquidity risk and is associated with high expected returns. The resulting price–volume relationship is U-shaped and positively sloped. In a dynamic extension of the model I show that this mechanism generates momentum as well as history-dependent volatility and price informativeness.

This study uses hand-collected information on shareholders’ backgrounds of mutual funds and their fund management companies (FMCs), and administrative and criminal penalties for insider trading as the proxy of government regulation intensity. We fill a gap in the literature by identifying a positive relationship between funds’ performance and the proportion of state-owned FMC ownership that becomes negative when the Chinese government increased its regulatory effort to reduce informational advantages from political connections obtained through this ownership channel. Results are robust using DiD and IV analyses, placebo tests, propensity score matching, Oster test for missing covariates, channel tests, and alternate ownership classifications.