We investigate whether teams exhibit increased or reduced overreaction in expectation formation relative to individuals. Using preregistered randomized experiments that directly elicit expectations about future returns, we find that teams display lower belief overreaction to recent investment performance. A quantitative decomposition shows that this team effect stems primarily from a “self-selection” mechanism, whereby the most biased team member chooses to influence the team decision less. An LLM-based analysis of team interactions reinforces this result. A complementary analysis of US equity mutual fund managers operating both individually and as part of a team yields consistent evidence of lower overreaction in teams.
{"title":"Do teams alleviate or exacerbate overreaction in beliefs?","authors":"Ricardo Barahona , Stefano Cassella , Kristy A.E. Jansen , Vincenzo Pezone","doi":"10.1016/j.jfineco.2025.104219","DOIUrl":"10.1016/j.jfineco.2025.104219","url":null,"abstract":"<div><div>We investigate whether teams exhibit increased or reduced overreaction in expectation formation relative to individuals. Using preregistered randomized experiments that directly elicit expectations about future returns, we find that teams display lower belief overreaction to recent investment performance. A quantitative decomposition shows that this team effect stems primarily from a “self-selection” mechanism, whereby the most biased team member chooses to influence the team decision less. An LLM-based analysis of team interactions reinforces this result. A complementary analysis of US equity mutual fund managers operating both individually and as part of a team yields consistent evidence of lower overreaction in teams.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104219"},"PeriodicalIF":10.4,"publicationDate":"2025-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145657236","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.jfineco.2025.104218
J. Anthony Cookson , Corbin Fox , Javier Gil-Bazo , Juan F. Imbet , Christoph Schiller
After the run on Silicon Valley Bank (SVB) in March 2023, U.S. regional banks entered a period of significant distress. We quantify social media’s role in this distress using comprehensive Twitter data. During the SVB run period, banks with high pre-existing exposure to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1-2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention, particularly when tweets are retweeted broadly.
在硅谷银行（Silicon Valley Bank）于2023年3月遭遇挤兑之后，美国地区银行进入了一段严重的困境时期。我们使用全面的Twitter数据来量化社交媒体在这种困境中的作用。在瑞典银行挤兑期间，先前对Twitter敞口较高的银行股票市值损失了4.3个百分点。此外，Twitter预敞口与经典挤兑风险显著相互作用，以预测第一季度至2023年期间更大的挤兑严重程度和更大的存款流出，其他银行或市场特征无法解释的影响。在挤兑期间的每小时频率上，过去四个小时内Twitter的高度关注预示着股市的损失，尤其是对那些具有高挤兑风险的银行。相比之下，我们发现负面的Twitter情绪并没有放大银行挤兑风险。相反，我们的证据表明，推特的注意力起着独特的作用，尤其是当推文被广泛转发时。
{"title":"Social media as a bank run catalyst","authors":"J. Anthony Cookson , Corbin Fox , Javier Gil-Bazo , Juan F. Imbet , Christoph Schiller","doi":"10.1016/j.jfineco.2025.104218","DOIUrl":"10.1016/j.jfineco.2025.104218","url":null,"abstract":"<div><div>After the run on Silicon Valley Bank (SVB) in March 2023, U.S. regional banks entered a period of significant distress. We quantify social media’s role in this distress using comprehensive Twitter data. During the SVB run period, banks with high <em>pre-existing exposure</em> to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1-2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention, particularly when tweets are retweeted broadly.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104218"},"PeriodicalIF":10.4,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145651554","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-27DOI: 10.1016/j.jfineco.2025.104207
Yuchen Chen , Xuelin Li , Richard T. Thakor , Colin Ward
We assess how labor mobility affects intangible investment in a dynamic agency model featuring both knowledge appropriation and moral hazard. We argue that restricting worker mobility, while reducing employees’ appropriation of firm intangible capital, can hurt their incentives to exert effort. Our calibration to U.S. data targets responses of employee turnover and firms’ intangible investment to variations in workers’ outside option values, identified through exogenous shocks to non-compete enforcement. The model simulation shows that knowledge spillovers mitigate the costs of incentive provision when agency frictions are severe, and the optimal labor mobility regulation should balance this benefit against turnover risk. Finally, we highlight the use of deferred compensation bonuses in the optimal contract as a retention mechanism, even among under-performing firms.
{"title":"Appropriated growth","authors":"Yuchen Chen , Xuelin Li , Richard T. Thakor , Colin Ward","doi":"10.1016/j.jfineco.2025.104207","DOIUrl":"10.1016/j.jfineco.2025.104207","url":null,"abstract":"<div><div>We assess how labor mobility affects intangible investment in a dynamic agency model featuring both knowledge appropriation and moral hazard. We argue that restricting worker mobility, while reducing employees’ appropriation of firm intangible capital, can hurt their incentives to exert effort. Our calibration to U.S. data targets responses of employee turnover and firms’ intangible investment to variations in workers’ outside option values, identified through exogenous shocks to non-compete enforcement. The model simulation shows that knowledge spillovers mitigate the costs of incentive provision when agency frictions are severe, and the optimal labor mobility regulation should balance this benefit against turnover risk. Finally, we highlight the use of deferred compensation bonuses in the optimal contract as a retention mechanism, even among under-performing firms.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104207"},"PeriodicalIF":10.4,"publicationDate":"2025-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145609081","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-23DOI: 10.1016/j.jfineco.2025.104216
Ulf Axelson, Igor Makarov
Entrepreneurs typically seek financing in decentralized markets, where they approach investors sequentially. We develop a model of sequential capital markets with privately informed investors. The sequential market creates a dynamic adverse selection externality that leads to overinvestment and excessive rents to intermediaries, even as the number of competing investors becomes arbitrary large. The resulting rents lead to excessive entry of investors and insufficient entry of entrepreneurs. Moving to a centralized market structure or reducing transparency restores competitiveness but may harm efficiency. The model also explains how even a small skill advantage for an investor can lead to preferential deal flow and outsized returns.
{"title":"Sequential credit markets","authors":"Ulf Axelson, Igor Makarov","doi":"10.1016/j.jfineco.2025.104216","DOIUrl":"10.1016/j.jfineco.2025.104216","url":null,"abstract":"<div><div>Entrepreneurs typically seek financing in decentralized markets, where they approach investors sequentially. We develop a model of sequential capital markets with privately informed investors. The sequential market creates a dynamic adverse selection externality that leads to overinvestment and excessive rents to intermediaries, even as the number of competing investors becomes arbitrary large. The resulting rents lead to excessive entry of investors and insufficient entry of entrepreneurs. Moving to a centralized market structure or reducing transparency restores competitiveness but may harm efficiency. The model also explains how even a small skill advantage for an investor can lead to preferential deal flow and outsized returns.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104216"},"PeriodicalIF":10.4,"publicationDate":"2025-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145583783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-21DOI: 10.1016/j.jfineco.2025.104205
Pawel Janas
I examine the effects of public debt on municipal services and real outcomes during financial crises using a unique archival dataset of U.S. cities from 1924 to 1943. Unlike today’s countercyclical fiscal policies, the Great Depression provides a rare setting to observe fiscal shocks without substantial intergovernmental or Federal Reserve support. My findings show that financial market frictions – especially the need to refinance debt – led cities to sharply cut expenditures, particularly on capital projects and police services. As urban development halted during the Depression, cities with high pre-crisis debt levels faced significant austerity pressures, a decline in population growth, a rise in crime, and a departure of skilled public servants from municipal governments.
{"title":"Public goods under financial distress","authors":"Pawel Janas","doi":"10.1016/j.jfineco.2025.104205","DOIUrl":"10.1016/j.jfineco.2025.104205","url":null,"abstract":"<div><div>I examine the effects of public debt on municipal services and real outcomes during financial crises using a unique archival dataset of U.S. cities from 1924 to 1943. Unlike today’s countercyclical fiscal policies, the Great Depression provides a rare setting to observe fiscal shocks without substantial intergovernmental or Federal Reserve support. My findings show that financial market frictions – especially the need to refinance debt – led cities to sharply cut expenditures, particularly on capital projects and police services. As urban development halted during the Depression, cities with high pre-crisis debt levels faced significant austerity pressures, a decline in population growth, a rise in crime, and a departure of skilled public servants from municipal governments.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104205"},"PeriodicalIF":10.4,"publicationDate":"2025-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145575608","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-21DOI: 10.1016/j.jfineco.2025.104203
Zhengyang Jiang , Hanno Lustig , Stijn Van Nieuwerburgh , Mindy Z. Xiaolan
In the presence of aggregate risk, governments face a trade-off between insuring taxpayers or bondholders. The literature assumes that the government can finance deficits at the risk-free rate, protecting bondholders at the expense of taxpayers. We characterize the implications of this assumption on the surplus process. Under reasonable debt dynamics, counter-cyclical debt issuance that protects taxpayers against adverse macro-economic shocks is limited in time and scope, and comes at the expense of higher long-run risk. We find that the restrictions imposed by risk-free debt are rejected in U.S. surplus data, especially after the GFC. Taxpayers have been protected at the expense of bondholders.
{"title":"Manufacturing risk-free government debt","authors":"Zhengyang Jiang , Hanno Lustig , Stijn Van Nieuwerburgh , Mindy Z. Xiaolan","doi":"10.1016/j.jfineco.2025.104203","DOIUrl":"10.1016/j.jfineco.2025.104203","url":null,"abstract":"<div><div>In the presence of aggregate risk, governments face a trade-off between insuring taxpayers or bondholders. The literature assumes that the government can finance deficits at the risk-free rate, protecting bondholders at the expense of taxpayers. We characterize the implications of this assumption on the surplus process. Under reasonable debt dynamics, counter-cyclical debt issuance that protects taxpayers against adverse macro-economic shocks is limited in time and scope, and comes at the expense of higher long-run risk. We find that the restrictions imposed by risk-free debt are rejected in U.S. surplus data, especially after the GFC. Taxpayers have been protected at the expense of bondholders.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104203"},"PeriodicalIF":10.4,"publicationDate":"2025-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145575671","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-20DOI: 10.1016/j.jfineco.2025.104204
João Granja , Nuno Paixão
We evaluate how bank mergers affect consumer welfare when banks set deposit rates with a high degree of uniformity across their branch networks. First, we document that merger-induced changes to local market concentration are only weakly correlated with pricing decisions. Second, we develop a structural model of the banking sector to simulate equilibrium post-merger deposit rates with and without uniform pricing. The simulated deposit rates from the model with uniform pricing best match the observed changes in deposit rates following bank mergers. We use the model to evaluate antitrust decisions that force acquirers to divest branches in order to contain local market concentration levels. Our counterfactual exercises suggest that forced divestitures sometimes improve consumer welfare but can also impose consumer welfare losses when antitrust regulators do not consider that uniform pricing practices might lead to better deposit rates at acquired branches after a merger.
{"title":"Bank consolidation and uniform pricing","authors":"João Granja , Nuno Paixão","doi":"10.1016/j.jfineco.2025.104204","DOIUrl":"10.1016/j.jfineco.2025.104204","url":null,"abstract":"<div><div>We evaluate how bank mergers affect consumer welfare when banks set deposit rates with a high degree of uniformity across their branch networks. First, we document that merger-induced changes to local market concentration are only weakly correlated with pricing decisions. Second, we develop a structural model of the banking sector to simulate equilibrium post-merger deposit rates with and without uniform pricing. The simulated deposit rates from the model with uniform pricing best match the observed changes in deposit rates following bank mergers. We use the model to evaluate antitrust decisions that force acquirers to divest branches in order to contain local market concentration levels. Our counterfactual exercises suggest that forced divestitures sometimes improve consumer welfare but can also impose consumer welfare losses when antitrust regulators do not consider that uniform pricing practices might lead to better deposit rates at acquired branches after a merger.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104204"},"PeriodicalIF":10.4,"publicationDate":"2025-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145575672","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-14DOI: 10.1016/j.jfineco.2025.104206
Julio Gálvez , Gonzalo Paz-Pardo
Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited stock market participation and the low risky asset holdings of households. Because people are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion and lower stock market participation costs. Older workers and higher earners are exposed to negatively skewed risk and choose lower stock exposures.
{"title":"Richer earnings dynamics, consumption and portfolio choice over the life cycle","authors":"Julio Gálvez , Gonzalo Paz-Pardo","doi":"10.1016/j.jfineco.2025.104206","DOIUrl":"10.1016/j.jfineco.2025.104206","url":null,"abstract":"<div><div>Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited stock market participation and the low risky asset holdings of households. Because people are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion and lower stock market participation costs. Older workers and higher earners are exposed to negatively skewed risk and choose lower stock exposures.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104206"},"PeriodicalIF":10.4,"publicationDate":"2025-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145529105","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-13DOI: 10.1016/j.jfineco.2025.104208
Mete Kılıç, Şelale Tüzel
We document that 20% of Compustat firms exhibit above-median investment rates despite having below-median marginal product of capital (MPK), seemingly “misallocating” resources. These firms are typically younger and more likely to experience substantial upwards jumps in sales and MPK in subsequent years. They contribute significantly to innovation, and their investments predict future aggregate productivity, creating value beyond their current MPK. We propose and estimate a simple endogenous firm growth model that captures key cross-sectional features and enables counterfactual analysis. Ignoring the potential for future jumps in hypothetical investment policies reduces MPK and investment dispersion but also lowers aggregate productivity.
{"title":"Investing in misallocation","authors":"Mete Kılıç, Şelale Tüzel","doi":"10.1016/j.jfineco.2025.104208","DOIUrl":"10.1016/j.jfineco.2025.104208","url":null,"abstract":"<div><div>We document that 20% of Compustat firms exhibit above-median investment rates despite having below-median marginal product of capital (MPK), seemingly “misallocating” resources. These firms are typically younger and more likely to experience substantial upwards jumps in sales and MPK in subsequent years. They contribute significantly to innovation, and their investments predict future aggregate productivity, creating value beyond their current MPK. We propose and estimate a simple endogenous firm growth model that captures key cross-sectional features and enables counterfactual analysis. Ignoring the potential for future jumps in hypothetical investment policies reduces MPK and investment dispersion but also lowers aggregate productivity.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"176 ","pages":"Article 104208"},"PeriodicalIF":10.4,"publicationDate":"2025-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145500197","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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