Journal of Banking & Finance最新文献

We develop a model showing that the effect of smooth ambiguity aversion on large risks, those that are independent of the holding period, is of first-order importance, in contrast to risks that are proportional to the holding period. To test this hypothesis, we construct an ex-ante measure of the price of uncertainty based on changes in the option-implied concavity of preferences. As predicted by our model, we find that such concavity increases ahead of scheduled macroeconomic announcements, which represent large risks. We also provide an estimate of the coefficient of relative ambiguity aversion and show how uncertainty varies across different announcements. Our results suggest that the macroeconomic announcement premium arises at least partly because of an increase in the price of uncertainty. One implication is that a fundamental benefit of securities markets is that they break large risks into small ones by allowing frequent trading, thereby reducing discount rates.

This paper investigates whether social capital plays a role in bank misconduct. I find that U.S. banks headquartered in high social capital areas, as indicated by the strength of civic norms and the density of social networks, are less likely to face enforcement actions. This relationship is mainly significant for banks with a lower geographical dispersion, and it holds in a range of robustness and endogeneity tests. I run additional tests based on classes of enforcement actions, components of social capital, risk-taking, opacity, and bank actions associated with negative externalities. These tests deliver results supporting the idea that the main findings of the paper are largely attributed to social capital's role in exerting external discipline, which prevents misconduct-related behaviors in banks.

This study explores how Chinese mutual fund managers’ degrees of disagreement (DOD) on stock market returns affect investor capital allocation decisions using a novel text-based measure of expectations in fund disclosures. In the time series, the DOD negatively predicts market returns. Cross-sectional results show that investors correctly perceive the DOD as an overpricing signal and discount fund performance accordingly. Flow-performance sensitivity (FPS) is diminished during high dispersion periods. The effect is stronger for outperforming funds and funds with substantial investments in bubble and high-beta stocks, but weaker for skilled funds. We also discuss the financial sophistication of investors and provide evidence that our results are not contingent upon such sophistication.

This paper describes a dataset on bank ownership that covers more than 6,500 banks in 181 countries. It documents that until 2010, there was a reduction in state-ownership of banks and an increase in foreign ownership. However, the Global Financial Crisis interrupted or reversed these trends. I show that at the country level, there is no robust relationship between bank ownership and each of GDP growth and financial depth. Bank-level regressions show that state-owned banks are less profitable and have a higher share of non-performing loans than their private (domestic or foreign) counterparts. There is also evidence that state-owned banks stabilize credit in the presence of domestic shocks (more so in the presence of positive shocks). Instead, foreign banks amplify external shocks. In terms of domestic shocks, foreign banks are not significantly different from their domestic private counterparts.

Using a sample of U.S. firms for the period 2005–2017, we provide evidence that managerial myopic actions contribute to corporate cybersecurity risk. Specifically, we show that abnormal cuts in discretionary expenditures, our proxy for managerial myopia, are positively associated with the likelihood of data breaches. The association is largely driven by firms that appear to cut discretionary expenditures to meet short-term earnings targets. In addition, the association is stronger for firms with greater short-term equity incentives, higher earnings response coefficients, low levels of institutional block ownership, or large market shares. Finally, firms appear to increase discretionary expenditures upon the announcement of data breaches by their industry peers.

We find that valuations of Venture Capital-backed startup companies invested by mutual funds are driven by their peer valuations rather than their fundamentals, such as operating performances. As startups oftentimes experience substantial valuation changes at their Initial Public Offerings (IPO), we also investigate the share pricing transition of startups from private to public companies. We find that more active pricing of shares prior to the IPO correlates with smaller discrepancies between private and public valuations as well as lower IPO mispricing, suggesting a link between private and public market pricing efficiency. Jointly, our results help investors and regulators achieve a better understanding of the dynamics behind misvaluation in private assets in general, and startups in particular.

Nonlinearities can arise in international investment factors because of a pecking order in barriers. When direct barriers are severe, improvements in governance factors such as rule of law and expropriation risk can increase investment. Only when severe barriers are ameliorated can factors such as firm-specific information, transaction costs and hedging motives become more important. Evidence from unconditional quantile regressions provides support for a pecking order hypothesis, as we find that investment factors vary across the distribution. Specifically, our empirical results indicate that access to basic information is important everywhere, governance and familiarity matter where barriers are high, roles for information and hedging motives become more apparent where barriers are moderate, and where there are no barriers small improvements in governance have little effect on investment. Going forward, analysis should incorporate nonlinearities inherent in cross-border barriers and investment.

We study overconfidence related to financial knowledge among men and women within U.S. households, venturing beyond prior research confined to subsamples such as CEOs, retail investors, and older adults. By expanding our study to the broader U.S. population, we provide evidence that women, on average, exhibit greater overconfidence than men – a discrepancy attributable to the gender difference in financial knowledge. We find a positive association between overconfidence and both investment risk-taking and savings behavior, while it correlates inversely with prudent credit card management. Our findings emphasize the instrumental role of financial literacy in mitigating overconfidence, providing a deeper understanding of the interaction between gender, overconfidence, and financial literacy. Our results carry profound implications for policy interventions and educational strategies.

Using a large sample of firms from 45 countries, we find that firms in countries with high-climate risk reduce their cash dividends but increasingly use share repurchases to make payouts. The evidence suggests that firms substitute dividends with repurchases to increase their payout flexibility in response to heightened climate risk. Operating volatility and financial constraints are two channels through which climate risk affects firms’ payout flexibility. Further analysis shows that the effect of climate risk on payout flexibility is more pronounced for firms that are more vulnerable to climate risk, and in countries where people are more concerned about climate risk and the national culture emphasizes uncertainty avoidance and long-term orientation.