FINANCIAL REVIEW最新文献

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.

We find that high-frequency trading (HFT) in stocks held by mutual funds negatively affects fund performance: when sorted by HFT intensity of holdings, funds in the top quintile underperform funds in the bottom quintile by 2.64% per year. The negative relation can be at least partially explained by the illiquidity premium induced by high-frequency traders’ preference for more liquid stocks. This reason for underperformance of mutual funds has not been previously explored or documented. In addition, we do not find evidence to support the concern that HFT raises trading costs of mutual funds.

Failure to attract and retain skilled labor exposes firms to skilled labor risk. This paper examines whether and how skilled labor risk affects trade credit offered by suppliers. The empirical analyses show that firms with greater exposure to skilled labor risk are associated with a reduction in trade credit granted by suppliers. It is consistent with the view that the risk arising from the departures of skilled employees is detrimental to firms. A change in employees who are well-connected with the suppliers undermines firms’ bargaining power with their suppliers. Organization capital, managerial ability, and financial constraint are important moderators.

This paper provides evidence that the trade secrets protection increases stock price crash risk. Using a quasi-experimental setting with the Uniform Trade Secrets Act (UTSA), we find that firms headquartered in states adopting the UTSA tend to have higher stock price crash risk. The results are robust to controlling for other trade secrets laws and the choice of crash risk measures, and they are more pronounced in small firms and firms with high market-to-book and low leverage ratios. A detailed mechanism analysis reveals that increased crash risk following the UTSA is attributed to an opaque information environment and investment inefficiency.

We use prior direct listings by public nonlisted REITs (PNLRs) to explore the impact of exchange membership on corporate governance. We study companies with public, but nonlisted shares in a unique setting where the influence of listing is distinct from the confounding effect of capital raising. Evidence suggests younger, more profitable companies with stronger governance and professional management are more likely to directly list. Institutional ownership increases after listing and these changes are not due to future capital raising. Moreover, internal corporate governance improves beyond the exchange's requirements, especially for those companies with greater stock liquidity and more institutional ownership.

We examine the effect of investor service costs on mutual fund performance. Benchmarking passive funds against ETFs managed by the same fund company with the same investment objectives, we show that passive funds on average underperform ETFs by 42 bps in annualized net returns, of which about 90% can be attributed to investor service costs. Further benchmarking active funds against passive funds, we show that active funds on average outperform passive funds by 31 bps in annualized gross returns. However, the higher expense ratios charged by active funds lead to about 28 bps of underperformance in annualized net fund returns.

This paper examines how ownership structure interacts with monetary policy in shaping financial intermediaries' appetite for risk. By constructing a large panel of banks across Western Europe, we provide evidence that differences in bank ownership influence the transmission of monetary policy via the risk-taking channel. While shareholder banks actively adjust the riskiness of their portfolios to changes in interest rates, stakeholder banks appear to be less responsive to such changes. These findings call for greater attention to the nature of bank ownership when setting monetary policy.