Journal of Banking & Finance最新文献

During the 2015 stock market crisis, the Chinese government used hundreds of billions of dollars to purchase shares directly in the secondary market. We find that compared with non-rescued firms, rescued firms have significantly lower liquidity after being rescued. Policy uncertainty regarding subsequent interventions better explains the reduction in liquidity than the liquidity dry-up and bad firm signaling hypotheses. Inconsistent with the potential moral hazards associated with government bailouts, the investment policies of rescued firms become more conservative after being rescued. Our evidence warns of the unintended consequences of direct purchase rescue programs.

Many Japanese bond issuers believe that global credit rating agencies (CRAs)—Moody's and S&P—do not consider the unique corporate governance structure in Japan and assign lower credit ratings even though the “main bank” relationship in Japan can significantly reduce the default risk of these companies. Using 5,814 rated corporate bonds issued by 558 non-financial firms in Japan from 2003 to 2021, we find that local CRAs (R&I and JCR) weigh unique Japanese corporate governance features more heavily and assign higher ratings to Japanese corporate bonds relative to global CRAs. Our results further suggest that the degree of rating differences between local and global CRAs for individual issuers results from systematically different assessments of company-specific risk by these CRAs. Our data also reveal that the importance of main bank ties in Japanese corporate governance remains intact in more recent years, contrary to previous findings.

Using a large sample of US-listed firms, we examine how firms’ dividend payout decisions are influenced by the dividend policies of their local peers. We find that the decisions to increase and decrease dividends are both influenced by the payout choices of firms headquartered in the same locality. We show that local peer effects are driven by the desire to compete for local dividend clineteles, with local peer effects proving more pronounced in geographies with greater retail investors clienteles, institutional-tax clienteles, and agency-cost clienteles. In contrast to dividends, share repurchases are not influenced by local peer repurchase decisions. Our findings prove robust to various sampling methods, peer portfolios, model specifications, and estimation techniques.

A large body of research documents an increased acquisition activity among credit rated firms. We examine whether firms seek an initial credit rating to conduct large scale acquisitions, and whether this acquisition activity is driven by empire building or value creation motives. First, we find that acquisitions are a credible motive for seeking a credit rating, initially rated firms are associated with 13.05pp greater acquisition likelihood and these transactions are more likely to be settled by cash. Second, to recoup the costs of becoming rated, firms conduct large-scale high-quality acquisitions associated with 1.52pp higher acquirer announcement returns, where the higher cumulative abnormal returns are concentrated among firms obtaining a speculative grade initial rating. Third, following the initial rating year, acquisition activity dampens to pre-rating levels. In sum our findings lend support to the notion that previously financial constrained firms enter the bond markets to complement bank financing when conducting large value enhancing acquisitions.

We study empirically the effect of growth in real economic activity on the strength of the bank credit channel of monetary policy in the United States using quarterly commercial bank-level panel data between 1986 and 2018, and bank-firm matched administrative data on loan volumes and terms between 2012 and 2018. We find that monetary policy is significantly more effective through the bank credit channel in spurring activity during periods of low economic growth than in cooling the economy when growth is high. Our results also suggest that the channel operates through a broader range of loan categories and banks than previously documented, that it is stronger for business than household lending, and that for some of the major loan categories it only operates in a low economic growth environment.

Using a proprietary dataset for 97 IPO firms, we examine investors’ trading activities in newly listed firms during the one-hour preopening auction on the Bombay Stock Exchange on the listing day. We document significant price discovery during the preopen. We find that the offer-to-first quote returns largely explain IPO initial returns. The probability of informed trading is much higher during the preopen than during the trading day, and trades by institutional investors are more informative than those by other investors. We also find that illiquidity decreased after the introduction of the preopening auction.

This paper examines the link between ownership concentration and corporate bond volatility. We show that more concentrated mutual fund ownership is associated with higher volatility of corporate bonds. This relation is stronger among more illiquid bonds, during periods of heightened bond market illiquidity, and among bonds held by corporate bond funds that invest in more illiquid bonds and experience higher or more correlated liquidity shocks. Using a sample of mutual fund mergers, we further show that increases in bond volatility are unlikely to be driven entirely by the endogenous ownership structure of corporate bonds. Our findings suggest that the concentrated ownership by corporate bond mutual funds provides another channel, apart from illiquidity, to help explain the excess volatility in corporate bonds.

This paper investigates whether and how opposing partisans differ in their wealth accumulation. Using microdata from a longitudinal U.S. household survey, I document that Democrats are on average 11% less likely than Republicans to participate in the stock market. Moreover, the partisan gap widens sharply, by 13%, under Democratic presidencies, precisely when the stock market returns are substantially higher. This dynamic pattern accounts for more than half of the discrepancy in wealth accumulation between Democrats and Republicans over presidential cycles. A decomposition exercise uncovers two underlying forces in opposite directions: while the partisan gap in stock market participation through directly held investment accounts narrows during Democratic presidencies, the narrowing gap is dominated by the widening partisan gap in stock market participation through retirement accounts during the same periods. I further provide speculative evidence that the widening gap is related to job changes, and in particular, entrepreneurship entry.

This study examines the interaction between bank deposit market competition, incentives to take risks on the asset side, and willingness to participate in the interbank market for liquidity coinsurance. The interbank market in the model has two countervailing effects on risk-taking. First, it allows for more profitable long-term investment, which adds to a bank’s charter value and decreases risk-taking motives. Second, greater investment in the long-term asset also makes risk-taking potentially more profitable, thus eroding charter value. Finally, risk-taking motives also influence banks’ decisions to participate in the interbank market. We demonstrate how a combination of capital requirements and posting a surety bond can restore charter value, promote cooperation and boost economic activity. Additionally, this measure does not limit competition in generating charter value and implies lower costs than capital requirements alone.

We document that leased capital constitutes about 30% of the total productive physical assets used by US public firms. We develop an analytical framework to demonstrate how the neglect of leases leads to an overestimation of productivity. This overestimation can be decomposed into two distinct channels: one arises from the mismeasured factor share, and the other from the omitted-leased-capital channel. Empirically, we find that the overestimation of aggregate productivity is substantial, has been increasing over time, and exhibits strong countercyclicality. In the cross-section, the decomposition of overestimation presents asymmetric patterns for firms of different sizes and levels of financial constraint. Our findings highlight the critical importance of explicitly accounting for the “unmeasured” leased capital in studies on productivity measurements.