Financial Management最新文献

Did the #MeToo movement, inspired by a Twitter post in late 2017 following the Weinstein scandal, influence the asset allocation decision process of mutual fund managers intending to show support for women empowerment? We find evidence to support the influence of such attention. We utilize the breakout of the #MeToo movement as an exogenous shock to the perception of gender equity issues. Using a difference-in-differences framework, we show that, compared to passively managed mutual funds, actively managed mutual funds tilt their portfolios toward firms with greater female representation in the C-suite, but only after the breakout. Our results are not explained by performance seeking, but are in part attributable to catering incentives. Moreover, the results become less significant when the marginal impact of changing perception is small. Using Google search volume to capture public sentiment closely tied to the perception of gender equality yields consistent results based on a larger sample. Our study sheds light on the recent rise of “gender lens investing” in the mutual fund industry.

This paper provides a novel perspective to the nexus of oil prices and stock markets by examining the impact of oil price shocks on stock market anomalies. After decomposing oil price shocks into three types , we find that aggregate demand shocks have the strongest influence on stock market anomalies. In contrast, oil supply shocks and oil-specific demand shocks have little impact. Similar results are also found in the industry analysis. Interestingly, the link between aggregate demand shocks and anomalies is the strongest among firms with either small size or high idiosyncratic risks. The documented effects are robust after controlling for investor sentiment as well as several well-known macroeconomic or market factors. Our findings are consistent with but also extend the sentiment-based explanation in that we show that uncertainty also plays a role in explaining stock market anomalies.

We examine the effect of firms’ dividend policy on product market outcomes. Exploiting the 2003 dividend tax cut as the exogenous increase in demand for dividends from tax-sensitive shareholders, we show that firms that raised dividends in response to the tax cut recorded lower sales growth in product markets after the tax cut. These firms experienced a reduction in financial flexibility, which led to a decrease in investment activities. Despite the negative effects of dividends on sales growth, firm value increased on average, indicating that the firms raised dividends when the shareholder benefits outweighed the costs.

Limited partners (LPs) of private equity funds commit to invest with extreme levels of illiquidity and significant uncertainty regarding the timing of capital flows, often exacerbated by the LPs’ spending requirements and portfolio rebalancing needs. Secondary markets have emerged that alleviate some of the associated cost. This paper develops a valuation model incorporating these institutional features. Model-implied breakeven returns match empirically observed average fund returns for moderately risk-tolerant LPs with private equity allocations up to 40%. In contrast, when earning average returns in private equity, highly risk-averse LPs optimally allocate only a few percent to the asset class.

Recent studies highlight the positive effect of political connections on firm performance and stock returns. This paper shows that the positive effect of political connections on stock returns becomes substantially weaker in the weak presidency period, defined as the last 2 years before presidential party change or period of low job approval ratings. We consider two hypotheses—political interconnectedness and political risk—and find that both hypotheses are important in explaining the weak presidency effect on stock returns, political benefits, and research and development and capital expenditure. There is a trade-off between direct political investment and passive political alignment. Firms with direct political investment tend to hedge political risk so that they can run their real side investment on their own schedule. Consistent with this story, we find that the weak presidency effect is more pronounced for small firms that lack the resources for direct political investment.

This paper examines how a tournament among CEOs to progress within the CEO labor market influences their corporate hedging policies. We employ a textual analysis of 10-Ks to generate corporate hedging proxies, finding that the likelihood and intensity of hedging grow as the CEO labor market tournament prizes increase. We also explore the mitigating impact of corporate hedging on the adverse effects of risk-inducing industry tournament incentives (ITIs) on the cost of debt and stock price crash risk, noting that these could be possible reasons behind the relation. Additionally, we observe that the relationship between ITIs and corporate hedging is less pronounced for firms that demonstrate more financial distress and for firms whose CEOs are the founders of the company or are of retirement age. We identify a causal relation between ITIs and corporate hedging using an instrumental variable approach and an exogenous shock sourced from changes in the enforceability of noncompetition agreements across states.

I investigate the role of institutional investors in firms’ lobbying activities. Firms with greater lobbying institutional ownership lobby more. Using a novel dataset with lobbying information on congressional bills, I show that institutional investors support portfolio firms by lobbying together on same bills. Bills lobbied by institutional investors are more likely to become laws and the passage of such bills leads to greater abnormal returns. Additional evidence suggests that institutional investors protect firms’ private political information by voting against shareholder proposals requesting additional lobbying disclosure. The findings have an important economic implication: financial institutions provide a helping hand in firms’ external governance related to law and politics.

Although trademarks are mentioned in many firms’ initial public offering (IPO) prospectuses, their influences on the IPO valuation process are underexplored. This paper studies the relationship between a firm's pre-IPO trademarks and its IPO underpricing. Using 4457 US IPOs during the period 1980–2018, we find that firms with a larger number of trademarks prior to the IPO date experience significantly less IPO underpricing. We employ a quasi-natural experiment brought about by the 1996 Federal Trademark Dilution Act and an instrumental variable approach to establish causality. Our findings suggest that trademarks help reduce information asymmetry among various IPO participants, leading to less underpriced IPOs.