Pub Date : 2025-06-12DOI: 10.1016/j.jfineco.2025.104114
Benjamin Golez , Peter Koudijs
After 1945, expected returns have started to dominate the variation in equity price movements, leaving little room for expected dividend growth. An increase in equity duration can help explain this change. Expected returns vary more for payouts further into the future. Furthermore, because expected returns are more persistent than growth rates, they are more important for longer-duration assets. We provide empirical support for this explanation across three datasets: dividend strips, the long time series for the aggregate market, and the cross-section of stocks. A simple present value model with time-varying duration can largely explain the post-1945 dominance of expected returns.
{"title":"Equity duration and predictability","authors":"Benjamin Golez , Peter Koudijs","doi":"10.1016/j.jfineco.2025.104114","DOIUrl":"10.1016/j.jfineco.2025.104114","url":null,"abstract":"<div><div>After 1945, expected returns have started to dominate the variation in equity price movements, leaving little room for expected dividend growth. An increase in equity duration can help explain this change. Expected returns vary more for payouts further into the future. Furthermore, because expected returns are more persistent than growth rates, they are more important for longer-duration assets. We provide empirical support for this explanation across three datasets: dividend strips, the long time series for the aggregate market, and the cross-section of stocks. A simple present value model with time-varying duration can largely explain the post-1945 dominance of expected returns.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104114"},"PeriodicalIF":10.4,"publicationDate":"2025-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144263592","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 : 2025-06-12DOI: 10.1016/j.jfineco.2025.104094
Vladimir Mukharlyamov , Natasha Sarin
This paper provides empirical evidence of a well-known theoretical concern that market failures in two-sided markets are hard to identify and correct. We study the reactions of banks, merchants, and consumers to Dodd-Frank’s Durbin Amendment that lowered interchange fees on debit card transactions. Banks recouped a significant portion of their losses by charging consumers for products that they previously provided for free on the subsidized side of the two-sided market. The accelerated adoption of credit cards with higher interchange fees likely diminished—if not eliminated—merchants’ savings. These effects impede the regulation’s stated objective of enhancing consumers’ welfare through lower retail prices.
{"title":"Price regulation in two-sided markets: Empirical evidence from debit cards","authors":"Vladimir Mukharlyamov , Natasha Sarin","doi":"10.1016/j.jfineco.2025.104094","DOIUrl":"10.1016/j.jfineco.2025.104094","url":null,"abstract":"<div><div>This paper provides empirical evidence of a well-known theoretical concern that market failures in two-sided markets are hard to identify and correct. We study the reactions of banks, merchants, and consumers to Dodd-Frank’s Durbin Amendment that lowered interchange fees on debit card transactions. Banks recouped a significant portion of their losses by charging consumers for products that they previously provided for free on the subsidized side of the two-sided market. The accelerated adoption of credit cards with higher interchange fees likely diminished—if not eliminated—merchants’ savings. These effects impede the regulation’s stated objective of enhancing consumers’ welfare through lower retail prices.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104094"},"PeriodicalIF":10.4,"publicationDate":"2025-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144271913","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 : 2025-06-11DOI: 10.1016/j.jfineco.2025.104116
Patrick Bolton
This article does three things: (1) it offers a slightly modernized treatment of the two well-known agency costs of external financing of Jensen and Meckling; (2) it provides a deeper exploration than they offer of the limited liability corporation, and of optimal control allocations when financial contracts are incomplete; and, (3) it assesses the lasting influence or their ideas, their multiple interpretations, as well as misinterpretations.
{"title":"Jensen and Meckling at 50","authors":"Patrick Bolton","doi":"10.1016/j.jfineco.2025.104116","DOIUrl":"10.1016/j.jfineco.2025.104116","url":null,"abstract":"<div><div>This article does three things: (1) it offers a slightly modernized treatment of the two well-known agency costs of external financing of Jensen and Meckling; (2) it provides a deeper exploration than they offer of the limited liability corporation, and of optimal control allocations when financial contracts are incomplete; and, (3) it assesses the lasting influence or their ideas, their multiple interpretations, as well as misinterpretations.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104116"},"PeriodicalIF":10.4,"publicationDate":"2025-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144304681","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 : 2025-06-11DOI: 10.1016/j.jfineco.2025.104126
{"title":"Honoring Michael C. Jensen","authors":"","doi":"10.1016/j.jfineco.2025.104126","DOIUrl":"10.1016/j.jfineco.2025.104126","url":null,"abstract":"","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104126"},"PeriodicalIF":10.4,"publicationDate":"2025-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145003836","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 : 2025-06-11DOI: 10.1016/j.jfineco.2025.104108
Paul Lieberman , Atanas Mihov , Andy Naranjo , Mihail Velikov
Trade credit is an important source of firm financing, yet its rich informational content pertaining to payment timeliness is under-explored in asset pricing. Using an extensive data set from a leading private information exchange on business payment performance, we study the effects of trade credit payment timeliness on stock returns. We document two distinct channels through which trade credit payment behavior impacts future stock returns — slow diffusion of information and risk stemming from a customer firm’s vertical bargaining power position in the supply chain. Consistent with our first channel, a sudden delay in a firm’s payment to its suppliers predicts significantly lower future returns for its stock. Consistent with our second channel, firms that pay their bills moderately late on a consistent basis relative to terms earn significantly higher stock returns.
{"title":"Show me the receipts: B2B payment timeliness and expected returns","authors":"Paul Lieberman , Atanas Mihov , Andy Naranjo , Mihail Velikov","doi":"10.1016/j.jfineco.2025.104108","DOIUrl":"10.1016/j.jfineco.2025.104108","url":null,"abstract":"<div><div>Trade credit is an important source of firm financing, yet its rich informational content pertaining to payment timeliness is under-explored in asset pricing. Using an extensive data set from a leading private information exchange on business payment performance, we study the effects of trade credit payment timeliness on stock returns. We document two distinct channels through which trade credit payment behavior impacts future stock returns — slow diffusion of information and risk stemming from a customer firm’s vertical bargaining power position in the supply chain. Consistent with our first channel, a sudden delay in a firm’s payment to its suppliers predicts significantly lower future returns for its stock. Consistent with our second channel, firms that pay their bills moderately late on a consistent basis relative to terms earn significantly higher stock returns.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104108"},"PeriodicalIF":10.4,"publicationDate":"2025-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144263591","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 : 2025-06-04DOI: 10.1016/j.jfineco.2025.104109
Huaizhi Chen
I show that as a portfolio’s value concentration increases, actively managed portfolios predictably trim large positions, maintaining a level of practical diversification. This rebalancing channel is concentrated at thresholds implied by regulatory guidelines and by a fund’s own risk management histories. Since larger stocks are typically held widely and in large weights, they experience a coordinated contrarian trading demand that originates from this form of risk management. Diversification driven demand captures a novel return-reversal pattern in the large stock portfolios. Compensating this source of demand accentuates momentum returns during the modern sample period (1990 to 2022).
{"title":"Diversification driven demand for large stock","authors":"Huaizhi Chen","doi":"10.1016/j.jfineco.2025.104109","DOIUrl":"10.1016/j.jfineco.2025.104109","url":null,"abstract":"<div><div>I show that as a portfolio’s value concentration increases, actively managed portfolios predictably trim large positions, maintaining a level of practical diversification. This rebalancing channel is concentrated at thresholds implied by regulatory guidelines and by a fund’s own risk management histories. Since larger stocks are typically held widely and in large weights, they experience a coordinated contrarian trading demand that originates from this form of risk management. Diversification driven demand captures a novel return-reversal pattern in the large stock portfolios. Compensating this source of demand accentuates momentum returns during the modern sample period (1990 to 2022).</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104109"},"PeriodicalIF":10.4,"publicationDate":"2025-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144212744","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 : 2025-06-02DOI: 10.1016/j.jfineco.2025.104096
Carter Davis , Mahyar Kargar , Jiacui Li
Classical asset pricing models predict that optimizing investors exhibit extremely high demand elasticities, while empirical estimates are significantly lower—by three orders of magnitude. To reconcile this disparity, we introduce a novel decomposition of investor demand elasticity into two key components: “price pass-through”, which captures how price movements forecast returns, and “unspanned returns”, reflecting a stock’s lack of perfect substitutes. In a factor model framework, we show that unspanned returns become significant when models include “weak factors”. Classical models overestimate demand elasticity by assuming both very low unspanned returns and high price pass-throughs, assumptions that are inconsistent with empirical evidence.
{"title":"Why do portfolio choice models predict inelastic demand?","authors":"Carter Davis , Mahyar Kargar , Jiacui Li","doi":"10.1016/j.jfineco.2025.104096","DOIUrl":"10.1016/j.jfineco.2025.104096","url":null,"abstract":"<div><div>Classical asset pricing models predict that optimizing investors exhibit extremely high demand elasticities, while empirical estimates are significantly lower—by three orders of magnitude. To reconcile this disparity, we introduce a novel decomposition of investor demand elasticity into two key components: “price pass-through”, which captures how price movements forecast returns, and “unspanned returns”, reflecting a stock’s lack of perfect substitutes. In a factor model framework, we show that unspanned returns become significant when models include “weak factors”. Classical models overestimate demand elasticity by assuming both very low unspanned returns and high price pass-throughs, assumptions that are inconsistent with empirical evidence.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104096"},"PeriodicalIF":10.4,"publicationDate":"2025-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144194971","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 : 2025-05-29DOI: 10.1016/j.jfineco.2025.104105
Robin Döttling , Magdalena Rola-Janicka
We analyze optimal carbon pricing under financial constraints and endogenous climate-related transition and physical costs. The socially optimal emissions tax may be above or below a Pigouvian benchmark, depending on the strength of physical climate impacts on pledgeable resources. We derive necessary conditions for emissions taxes alone to implement a constrained-efficient allocation, and show a cap-and-trade system may dominate emissions taxes because it can be designed to have a less adverse effect on financial constraints. We also assess how capital structure, carbon price hedging markets, and socially responsible investors interact with emissions pricing, and evaluate other commonly used policy tools.
{"title":"Too Levered for Pigou: Carbon pricing, financial constraints, and leverage regulation","authors":"Robin Döttling , Magdalena Rola-Janicka","doi":"10.1016/j.jfineco.2025.104105","DOIUrl":"10.1016/j.jfineco.2025.104105","url":null,"abstract":"<div><div>We analyze optimal carbon pricing under financial constraints and endogenous climate-related transition and physical costs. The socially optimal emissions tax may be above or below a Pigouvian benchmark, depending on the strength of physical climate impacts on pledgeable resources. We derive necessary conditions for emissions taxes alone to implement a constrained-efficient allocation, and show a cap-and-trade system may dominate emissions taxes because it can be designed to have a less adverse effect on financial constraints. We also assess how capital structure, carbon price hedging markets, and socially responsible investors interact with emissions pricing, and evaluate other commonly used policy tools.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"172 ","pages":"Article 104105"},"PeriodicalIF":10.4,"publicationDate":"2025-05-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144168678","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 : 2025-05-27DOI: 10.1016/j.jfineco.2025.104071
Wei Jiang , Yuehua Tang , Rachel J. Xiao , Vincent Yao
We examine the impact of fintech on firm labor demand, job turnover, and firm performance. Occupations with higher exposure to fintech experience a net decline in job postings and employment, though both complementary and substitutive effects emerge across different sectors. Fintech blurs traditional industry boundaries, creating demand for workers with a combination of finance and technology skills. In response, firms upskill through hiring, reallocate talent internally, and pivot innovation to new areas. As a result, firms are better equipped to absorb the shock than individual workers, with innovative firms even experiencing growth in employment, sales, and productivity upon fintech disruption.
{"title":"Surviving the fintech disruption","authors":"Wei Jiang , Yuehua Tang , Rachel J. Xiao , Vincent Yao","doi":"10.1016/j.jfineco.2025.104071","DOIUrl":"10.1016/j.jfineco.2025.104071","url":null,"abstract":"<div><div>We examine the impact of fintech on firm labor demand, job turnover, and firm performance. Occupations with higher exposure to fintech experience a net decline in job postings and employment, though both complementary and substitutive effects emerge across different sectors. Fintech blurs traditional industry boundaries, creating demand for workers with a combination of finance and technology skills. In response, firms upskill through hiring, reallocate talent internally, and pivot innovation to new areas. As a result, firms are better equipped to absorb the shock than individual workers, with innovative firms even experiencing growth in employment, sales, and productivity upon fintech disruption.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"171 ","pages":"Article 104071"},"PeriodicalIF":10.4,"publicationDate":"2025-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139200","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 : 2025-05-27DOI: 10.1016/j.jfineco.2025.104076
Hyeyoon Jung , Robert F. Engle , Richard Berner
We develop a market-based methodology to assess banks’ resilience to climate-related risks and study the climate-related risk exposure of large global banks. We introduce a new measure, CRISK, which is the expected capital shortfall of a bank in a climate stress scenario. To estimate CRISK, we construct climate risk factors and dynamically measure banks’ stock return sensitivity (that is, climate beta) to the climate risk factor. We validate the climate risk factor empirically and the climate beta estimates by using granular data on large US banks’ loan portfolios. The measure is useful in quantifying banks’ climate-related risk exposure through the market risk and the credit risk channels.
{"title":"CRISK: Measuring the climate risk exposure of the financial system","authors":"Hyeyoon Jung , Robert F. Engle , Richard Berner","doi":"10.1016/j.jfineco.2025.104076","DOIUrl":"10.1016/j.jfineco.2025.104076","url":null,"abstract":"<div><div>We develop a market-based methodology to assess banks’ resilience to climate-related risks and study the climate-related risk exposure of large global banks. We introduce a new measure, <em>CRISK</em>, which is the expected capital shortfall of a bank in a climate stress scenario. To estimate <em>CRISK</em>, we construct climate risk factors and dynamically measure banks’ stock return sensitivity (that is, <em>climate beta</em>) to the climate risk factor. We validate the climate risk factor empirically and the climate beta estimates by using granular data on large US banks’ loan portfolios. The measure is useful in quantifying banks’ climate-related risk exposure through the market risk and the credit risk channels.</div></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":"171 ","pages":"Article 104076"},"PeriodicalIF":10.4,"publicationDate":"2025-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139202","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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