Financial Management最新文献

The academic finance profession has the potential to be uniquely purposeful due to four characteristics – the freedom to take risks and work on what we're passionate about, the loyalty to our profession rather than just our institution, the collaborative nature of the creation and dissemination of knowledge, and the magnitude of our potential impact. However, what the profession currently values, and its current social norms, are significant barriers to the fulfilment of this potential. This article highlights the special features of our profession that we often take for granted and ignore, and proposes ideas to make it not only more impactful and relevant but also more collegial and fun.

We study how syndicated lending networks propagate natural disasters. Natural disasters lead to an increase in corporate credit demand in affected regions. Banks meet the increase in credit demand in part by reducing credit to distant regions, unaffected by disasters. Capital constraints play a key role in this effect as lower-capital banks propagate disasters to unaffected regions to a greater extent. While shadow banks offset the reduction in bank credit supply on term loan syndicates, they do not offset the loss in credit line financing. As a result, corporate credit in unaffected regions falls by approximately 3%.

Based on 21,653 innovative firms from 61 non-U.S. economies, we find a positive relationship between a firm's innovativeness and cash holdings. This relationship is stronger after the implementation of patent boxes that provide preferential tax treatment for patent income. Moreover, innovative multinationals facing higher repatriation taxes accumulate higher total cash holdings. The positive innovativeness–cash relationship varies with institutional environments and is more pronounced in countries with higher R&D tax credits, less developed financial markets, better governance, stronger shareholder rights, more technicians, better infrastructure, greater investment freedom, and in industries with fiercer competition and longer innovation cycles. Innovative firms with higher cash holdings invest more in R&D and generate more patents. Overall, our findings provide insights into the driving forces underlying the large cash accumulation in innovative firms worldwide.

We show that the concurrent relation between quarterly stock returns and inflation shocks is economically and robustly significant only over weaker economic (WE) times, strongly negative prior to the late 1990s, and strongly positive afterwards. Conversely, in the stronger economic times over our 1981 to 2017 sample, this stock-inflation relation is relatively much smaller and usually marginally negative. Our evidence suggests a role for two complementary channels. First, we find consistent state-dependent patterns in how inflation shocks are related to expected economic growth and the equity risk premium, indicating that inflation nonneutrality is stronger over WE times. Second, our findings imply that the inflation signal about the underlying economic state intensifies during WE times, due to the elevated economic-state uncertainty then. We also contribute by contrasting subjective (survey-based) versus objective inflation shocks and by evaluating the relation between inflation shocks and forward equity yields.

We study the dynamics of two governance constructs, managerial influence over the board of directors and chief executive officer (CEO) compensation, in firms undergoing distress during 1992–2019. Data show a clear trend that governance improves over time, which confounds the inference about the effects of distress on governance. Controlling for the secular changes with a bias-corrected matching estimator, we find that distressed firms reduce managerial board appointments and CEO pay, intensify managerial incentive alignment, and increase CEO turnover. The bulk of CEO compensation changes in distressed firms derives from the performance-related part of compensation, consistent with the “shareholder value” view of CEO compensation.

We examine the relationship between deviating from the benchmark and subsequent performance for hedge funds. We propose a simple new measure of benchmark deviations, termed the dispersion contribution index, which is based on a fund's return-distance from the mean return of same-style funds. We find that funds which deviate the most from their benchmark tend to underperform relative to their less distinctive peers, after accounting for their risk profile and various fund characteristics. This relative underperformance stems primarily from the higher subsequent risk exposure associated with pursuing a unique strategy. Our results are indicative of risk shifting by fund managers attempting to maximize the value of their compensation contracts.

We examine how the introduction of credit default swap (CDS) trading on the debt of individual firms affects corporate payout policy. We find that firms increase payouts to shareholders after the introduction of CDS trading on their debt. This suggests that CDS-referenced firms are more likely to be affected by decreased creditor monitoring than by tougher CDS-insured creditors when determining total payout amount. Moreover, the increase in payouts after CDS introduction is more pronounced in firms with smaller institutional ownership and greater bank debt dependency. Finally, we show that CDS-referenced firms tend to prefer stock repurchases that have a financial flexibility advantage over dividends to protect against the potential threat of tougher CDS-insured creditors.

Centrality in the network of interindustry trade relationships provides novel insights into an industry's economic attributes and managerial incentive contracts prevalent in the industry. More “central” industries trade with a large number of industries, implying numerous but relatively weaker interindustry ties. Weakness of interindustry ties suggests that relationship-specific investment (RSI) will be less important and output will be relatively more commoditized in central industries. As predicted, central industry firms are less innovative, face greater competition, and have lower idiosyncratic risk. Further, CEOs in central industries receive lower pay and weaker incentives. Tournament incentives are also weaker in more central industries.

This paper investigates how volatility of performance affects the sensitivity of mutual fund flows to past performance, and examines how investor learning may contribute to this effect. We illustrate theoretically that when sophisticated investors learn from past fund performance to form their posterior expectations of managerial ability, the flow-performance sensitivity should be weaker for funds with more volatile past performance. Moreover, the dampening effect of performance volatility on the flow-performance sensitivity should be stronger for funds attracting more sophisticated investors. We provide supporting evidence for this investor learning hypothesis using mutual fund flows and demonstrate variations in the volatility dampening effect across funds with differing levels of sophistication among investors, such as load versus no-load, high-expense versus low-expense, retail versus institutional, and star versus nonstar funds.