Financial Management最新文献

The corresponding author's name is Nicholas Guest, and their e-mail address is [email protected].

Volume 52, Issue 1, 19–40, article first published online 02 February 2023

In the article, Figure 1, Figure 2, and Table 1 need to be updated. The correct figures and table should read as follows:

This paper investigates the impact of the onset of the COVID-19 pandemic in the United States on closed-end fund (CEF) discounts. I show that CEF discounts increased after the onset of the COVID-19 pandemic in the United States, while individual investor sentiment declined. Furthermore, CEFs with higher retail ownership had a larger discount increase, which suggests that individual investor sentiment is a potential contributor to CEF discounts. This finding seems less likely to be driven by rational channels or income-driven fire sales, as shown by further analysis. Overall, the results shed light on the CEF discount puzzle using a new setting.

Using proposal-level data in China, we document that online voting significantly increases minority shareholders’ participation in voting, and online voting is related to more dissenting votes. The association between online voting and minority shareholders’ participation and dissent is stronger in underperforming firms, indicating that minority shareholders tend to participate and dissent to express dissatisfaction. The association is stronger for shareholders with stronger voting power. Finally, we find that when minority shareholders’ dissent fails to veto a proposal, dissenting minority shareholders are less likely to participate and vote again the following year. Our results suggest that mechanisms designed to facilitate minority shareholder voting lead to greater and more informed participation in the corporate governance process.

We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount-rate shocks. Lower equity costs therefore imply that market power is partly self-perpetuating.

This paper analyzes sustainability-linked loans (SLLs), a new category of debt instrument that incorporates environmental, social, and governance (ESG) considerations. Using a large sample of loans issued between 2017 and 2022, we assess the design of SLLs by evaluating their key performance indicators (KPIs) using a comprehensive quality score. Our findings suggest that SLLs only partially rely on KPIs that generate credible sustainability incentives. We document that SLL borrowers do not significantly improve their ESG performance post issuance and show that stock markets are rather indifferent to the issuance of SLLs by EU borrowers, while SLL issuance announcements by US borrowers are met with significantly negative abnormal returns by investors. These findings call into question the beneficial sustainability and signaling effects that borrowers may hope to achieve by issuing ESG-linked debt.

We examine whether increasing investor attention affects stock price efficiency. To identify the causal effect, we employ daily repeated quasi-natural experiments in China where investor attention difference is purely driven by price rounding effect without information regarding stock fundamentals. Stocks tend to draw significant more attention and show higher price efficiency after being exposed to the Winner List. We also find supporting evidence for two nonexclusive channels through which investor attention enhance stock price efficiency: increasing stock liquidity and stronger net inflows from large orders. The positive relationship between investor attention and price efficiency is more pronounced among stocks with lower institutional shareholdings, stocks without overseas or Big Four audit firms, and stocks without B- or H-shares. Our findings further shed light on the significant impact of saliency on the capital market.

The validity of asset pricing models implies white-noise pricing errors (PEs). However, we find that the PEs of six well-known factor models all exhibit a significant reversal pattern and are predictable by their lagged values up to 12 months. Moreover, the predictability of the PEs can produce substantial economic profits. Similar conclusions hold for recently developed machine learning models too. Additional analysis reveals that the significant PE profits cannot be explained by common behavioral biases. Our results imply that much remains to be done and there is a great need to develop new asset pricing models.

We show that firms hype up their corporate social responsibility (CSR) narratives during the turn-of-the-year earnings conference calls to project an overly responsible public image of their firms. This previously unexplored phenomenon does not appear to be related to past, current, and future CSR engagements and cannot be explained by observed time-varying firm attributes and unobserved time-invariant firm and CEO attributes. We find that the fourth-quarter CSR narrative hike is more pronounced among firms that are (ex ante) expected to do more corporate good as well as firms embedded in dirty industries, but less prevalent among firms facing elevated product-market threats. Although elevated CSR narrative is associated with positive short-term market reaction and lower near-term stock price crash risk, such behavior tends to reduce financial report readability and leads to lower equity valuation in the longer term. Our analyses suggest that CSR narrative hike at the turn-of-the-year is a pervasive phenomenon in the corporate landscape and may have valuation and governance implications.

This paper proposes a novel time-varying present-value model to analyze the joint dynamics of stock returns and cash flows periodically. We use a nonparametric time-varying vector autoregressive model to examine the economic implications of the time-varying present-value model. By conducting several nonparametric tests, we reject the stability of multivariate forecasting models and the null that stock returns and cash flows are simultaneously unpredictable in any given period. Additional bootstrap analyses show that under the null of unpredictable returns, dividend growth is highly predictable. Finally, the proposed time-varying present-value framework holds robustly for both the dividend–price ratio and the earnings–price ratio.

What role does investors’ firsthand experience have in stock selection, and does this firsthand experience lead to better investment outcomes? Using a unique data set containing the stock research activities of patrons of Las Vegas casino hotels, we find evidence that investors’ firsthand experience motivates interest in Vegas-related travel industry stocks. Additionally, their interest in these stocks predicts strong performance; Vegas interest leads to positive abnormal returns of up to 3.7% (0.4%) over the following year (month), and abnormal returns are highest in industries that are related to Las Vegas.