Journal of Financial Economics最新文献

Does the stock market exert short-term pressure on listed firms, do they respond, and is this response value reducing? We show that limited investor horizons indeed have those consequences, as follows. First, informative stock prices increase firm value; in our model, they reduce the agency cost of incentivizing managers. Second, short project maturity improves stock price informativeness by catering to informed investors with short horizons. Third, since informed trading capital is a scarce resource, attracting informed investors cannot increase an individual firm’s price informativeness in equilibrium: it simply destroys shareholder value. This “short-termism trap” can potentially destroy up to 100% of the benefits of stock market listing.

How does financial market concentration affect capital allocation? We propose a complete-markets model in which real investment and financial price impact are jointly determined in general equilibrium. We identify a two-way feedback mechanism whereby price impact induces misallocation and misallocation raises price impact. The mechanism is stronger if productivity is low or productivity dispersion is high. Given rising dispersion, the model can rationalize trends in corporate discount rates, cash holdings, investment, asset prices, and capital reallocation over the last two decades, even when market concentration is relatively stable. Overall, our findings suggest that financial market concentration may hamper allocative efficiency.

The slope carry takes a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry takes a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry return is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional carry return is lower post-2008; and (iii) expected global growth and inflation declined post-2008. We connect these findings through an equilibrium model in which countries feature heterogeneous exposure to news shocks about global output and global inflation.

Using 31 years of data (1990–2020) on U.S. Treasury dealer positions, we find that Treasury issuance is the main driver of dealers’ weekly inventory changes. Such inventory fluctuations are only partially offset in adjacent weeks and not significantly hedged with futures. Dealers are compensated for inventory risk by means of subsequent price appreciation of their holdings. Amid increased balance sheet costs attributable to post-crisis regulatory changes, dealers significantly reduce their position taking and layoff inventory faster. Moreover, the increased participation of non-dealers (investment funds) in the primary market contributes to diminishing compensation for inventory risk taken on at auctions.

We study how intermediaries – mortgage servicers – shaped the implementation of mortgage forbearance during the COVID-19 pandemic and use servicer-level variation to trace out the causal effects of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers, nonbanks, and especially nonbanks with small liquidity buffers, facilitated fewer forbearances and saw a higher incidence of forbearance-related complaints. Easier access to forbearance substantially increased mortgage nonpayment but also reduced delinquencies outside of forbearance. Part of the liquidity from forbearance was used to reduce credit card debt, but most was saved or used for nondurable consumption.

We exploit the extinction of the thrift supervisor (OTS) to analyze the effects of supervision on bank lending and bank management. We first show that the OTS replacement resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects and show that former OTS banks on average increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized banks and especially in banks that changed management practices following the supervisory transition. These findings suggest that stricter supervision operates not only through the enforcement of loss recognition and capital adequacy, but can also act as a catalyst for operational changes that correct deficiencies in bank management and lending practices, which in turn increase lending.

We examine whether discrimination affects customers’ willingness to pay their suppliers. Using a dataset of detailed trade credit networks, we find that when facing a macroeconomic shock, customers delay payments to their suppliers with female or black trade credit officers at a 10%–20% higher rate relative to their payments to non-minorities. These results hold after controlling for a host of economic differences between minority groups and non-minority groups. In particular, we exploit the complexity of the supply chain network – wherein suppliers transact with multiple customers in each month and customers transact with multiple suppliers in each month – to estimate within-relationship changes in payment behavior during periods of financial hardship. Results indicate that the largest increases in payment delays are between customers that are classified as having racial or gender biases and suppliers that have minority lead credit officers. The results suggest that biased beliefs and preferences play a critical role in trade credit.

In household finance markets, inactive households can implicitly cross-subsidize active households who promptly respond to financial incentives. We assess the magnitude and distribution of cross-subsidies in the mortgage market. To do so, we build a structural model of household mortgage refinancing and estimate it on rich administrative data covering the stock of outstanding mortgages in the UK. We estimate sizeable cross-subsidies that flow from relatively poorer households and those located in less-wealthy areas towards richer households and those located in wealthier areas. Our work highlights how the design of household finance markets can contribute to wealth inequality.

We examine social media attention and sentiment from three major platforms: Twitter, StockTwits, and Seeking Alpha. We find that, even after controlling for firm disclosures and news, attention is highly correlated across platforms, but sentiment is not: its first principal component explains little more variation than purely idiosyncratic sentiment. Using market events, we attribute differences across platforms to differences in users (e.g., professionals versus novices) and differences in platform design (e.g., character limits in posts). We also find that sentiment and attention contain different return-relevant information. Sentiment predicts positive next-day returns, but attention predicts negative next-day returns. These results highlight the importance of considering both social media sentiment and attention, and of distinguishing between different investor social media platforms.

This paper investigates fractional share trading. We develop a latency-based method for identifying a large sample of fractional share trades. We find that high-priced stocks, meme stocks, IPOs, SPACs, and popular retail stocks exhibit considerable numbers of these tiny trades. We surmise that this reflects dollar-based order entry, with many tiny trades being fractional components of larger orders. We show that our fractional trade measure is predictive of future liquidity and volatility, suggesting a new metric to capture the information in retail trades. We identify how data and reporting protocols preclude knowing the extent of fractional share trading, inflate volume data, and provide censured samples of these off-exchange trades.