Forthcoming Articles

Corporate ESG Profiles and Investor Horizons

Version of Record online: 1/8/2026  |  DOI: 10.1111/jofi.70008

LAURA T. STARKS, PARTH VENKAT, QIFEI ZHU

We find that long‐term institutional investors tilt their portfolios toward firms with better Environmental, Social, and Governance (ESG) profiles, in the cross sections of both institutional investor portfolios and the ownership of firms. We test whether several theoretically motivated mechanisms can explain this relationship. Our results that long‐term investors exhibit patience with firms around poor earnings announcements, but quickly sell portfolio firms after negative ES incidents, support the view that long‐ and short‐term investors evaluate information differently. Our evidence shows that limits‐to‐arbitrage play a role, as we find that investors' ESG tilt weakens following regulatory shocks that shorten their horizon.

Default Risk and the Pricing of U.S. Sovereign Bonds

Version of Record online: 1/6/2026  |  DOI: 10.1111/jofi.70014

ROBERT F. DITTMAR, ALEX HSU, GUILLAUME ROUSSELLET, PETER SIMASEK

We examine the relative pricing of nominal Treasury bonds and Treasury inflation‐protected securities in the presence of U.S. default risk. Hedged breakeven inflation is significantly positively related to U.S. default risk, driven by correlation between shocks to default risk and both shocks to inflation swap premia and Treasury yields. To understand the mechanisms through which default risk is related to inflation swaps and sovereign yields, we estimate an affine term structure model to capture their joint dynamics. Our estimation implies that the interaction between inflation dynamics and default is the primary source of differential pricing.

The Long‐Lasting Effects of Experiencing Communism on Attitudes toward Financial Markets

Version of Record online: 12/25/2025  |  DOI: 10.1111/jofi.70006

CHRISTINE LAUDENBACH, ULRIKE MALMENDIER, ALEXANDRA NIESSEN‐RUENZI

We show that exposure to anti‐capitalist ideology can exert a lasting influence on attitudes toward capital markets and stock market participation. Using novel survey, bank, and broker data, we document that, decades after Germany's reunification, East Germans invest significantly less in stocks and hold more negative views on capital markets. Effects vary by personal experience under communism. Results are strongest for individuals who remember life in the German Democratic Republic positively, for example, those living in a “showcase city.” Results reverse for those with negative experiences like environmental pollution or lack of Western TV entertainment.

Investment under Upstream and Downstream Uncertainty

Version of Record online: 12/22/2025  |  DOI: 10.1111/jofi.70010

FOTIS GRIGORIS, GILL SEGAL

The impact of uncertainty shocks on firm‐level economic activity depends on their origin in supply chains. Upstream (downstream) uncertainty from suppliers (customers) is associated with variability over future input (output) prices. Consequently, a real‐option production model with time‐to‐build suggests that only upstream uncertainty suppresses investment, since upstream (downstream) uncertainty affects the shorter (longer) run. Production network data show that upstream uncertainty negatively affects firm‐level outcomes. Conversely, downstream uncertainty affects firm‐level outcomes more weakly but positively. At the macro level, these two uncertainties oppositely predict aggregate growth and asset prices. Overall, downstream uncertainty has an expansionary effect, in contrast to other facets of uncertainty.

FinTech Lending and Cashless Payments

Version of Record online: 12/18/2025  |  DOI: 10.1111/jofi.70003

PULAK GHOSH, BORIS VALLEE, YAO ZENG

Borrowers' use of cashless payments improves their access to capital from FinTech lenders and predicts a lower probability of default. These relationships are stronger for cashless technologies providing more precise information, and for outflows. Cashless payment usage complements other signals of borrower quality. We rationalize these empirical findings using a framework in which borrowers signal their lower likelihood of diverting cash flows through payment technology choice, and screening accuracy is further strengthened by informational complementarities. The informational synergy we uncover provides a rationale for the joint rise of cashless payments and FinTech lending, as well as for open banking.

What Drives Investors' Portfolio Choices? Separating Risk Preferences from Frictions

Version of Record online: 12/17/2025  |  DOI: 10.1111/jofi.70013

TAHA CHOUKHMANE, TIM DE SILVA

We study the role of risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of retirement wealth declining with age—patterns markedly different from observed allocations. We use this quasi‐experiment to estimate a life‐cycle model and find a relative risk aversion of 2.5, elasticity of intertemporal substitution (EIS) of 0.25, and $160 portfolio adjustment cost. The results suggest that low levels of stock market participation in retirement accounts are due to participation frictions rather than nonstandard preferences such as loss aversion.

An Economic View of Corporate Social Impact

Version of Record online: 12/15/2025  |  DOI: 10.1111/jofi.70004

HUNT ALLCOTT, GIOVANNI MONTANARI, BORA OZALTUN, BRANDON TAN

Growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact, suggesting that consumer impacts deserve more attention from impact investors. Existing environmental, social, and governance (ESG) and social impact ratings are essentially unrelated to our economically grounded measures.

Losing Control? The Two‐Decade Decline in Loan Covenant Violations

Version of Record online: 12/14/2025  |  DOI: 10.1111/jofi.70005

THOMAS P. GRIFFIN, GREG NINI, DAVID C. SMITH

The annual proportion of U.S. public firms that reported a financial covenant violation fell roughly 70% between 1997 and 2019. To understand this trend, we develop an estimable model of covenant design that depends on the ability to differentiate between distressed and nondistressed borrowers and the relative costs associated with screening incorrectly. We find that the drop in violations is best explained by an increased willingness to forgo early detection of distressed borrowers in exchange for fewer inconsequential violations, which we attribute largely to a shift in the composition of public borrowers and partly to heightened investor sentiment during the 2010s.

Second Chance: Life with Less Student Debt

Version of Record online: 12/14/2025  |  DOI: 10.1111/jofi.70002

MARCO DI MAGGIO, ANKIT KALDA, VINCENT YAO

We exploit an episode of plausibly random debt discharge due to the loss of paperwork for thousands of defaulted borrowers to examine the effects of private student debt relief on borrower outcomes. We find that borrowers who receive debt relief (treated) experience declines in debt balances and delinquency rates on other accounts, and increases in mobility and income relative to those who bear the costs of default like wage garnishment and collections (control). Borrowers in both groups contribute to our findings through different mechanisms. While our estimates may not directly apply to blanket student loan forgiveness, they speak to the benefits of forgiveness in reducing the consequences of debt burden for distressed borrowers.

Going Public and the Internal Organization of the Firm

Version of Record online: 12/9/2025  |  DOI: 10.1111/jofi.70012

DANIEL BIAS, BENJAMIN LOCHNER, STEFAN OBERNBERGER, MERIH SEVILIR

This paper examines how initial public offerings (IPOs) affect firms' internal organization. We find that IPO firms become more hierarchical and standardized organizations, characterized by additional layers, more managers, smaller control spans, and larger administrative functions. These changes occur mostly in preparation for the IPO and can be only partially explained by growth. IPO firms with greater human capital risk experience larger hierarchical changes. Hierarchical changes help firms standardize employee roles and formalize internal processes. Our results suggest that firms reorganize to reduce their dependence on key individuals' human capital when transitioning to public markets.

Adverse Selection in Corporate Loan Markets

Version of Record online: 12/9/2025  |  DOI: 10.1111/jofi.70011

MEHDI BEYHAGHI, CESARE FRACASSI, GREGORY WEITZNER

Theories of competition typically predict a positive relationship between market concentration and prices. However, in loan markets, adverse selection can reverse this relationship as riskier borrowers become more likely to receive funding. Using supervisory data, we show that interest rates, borrower risk, and lending volume are higher in markets with more banks. We also create a novel measure of markup that is orthogonal to borrower risk, and find that, consistent with adverse selection, markups are higher after repeated borrowing relationships. Finally, we use a shock to large banks' lending costs to provide further support for the adverse selection channel.

Paying Too Much? Borrower Sophistication and Overpayment in the U.S. Mortgage Market

Version of Record online: 12/9/2025  |  DOI: 10.1111/jofi.70001

NEIL BHUTTA, ANDREAS FUSTER, AUREL HIZMO

Comparing mortgage rates that borrowers obtain to rates that lenders could offer for the same loan, we find that many homeowners significantly overpay for their mortgage, with overpayment varying across borrower types and with market interest rates. Survey data reveal that borrowers' mortgage knowledge and shopping behavior strongly correlate with the rates they secure. We also document substantial variation in how expensive and profitable lenders are, without any evidence that expensive loans are associated with a better borrower experience. Despite many lenders operating in the U.S. mortgage market, limited borrower sophistication may provide lenders with market power.

Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals

Version of Record online: 11/25/2025  |  DOI: 10.1111/jofi.13508

J. ANTHONY COOKSON, MARINA NIESSNER, CHRISTOPH SCHILLER

This paper studies whether social media sentiment predicts merger withdrawals. We find that a one‐standard‐deviation increase in social media sentiment after a merger announcement is associated with a 0.64 percentage point lower probability of withdrawal (16.6% of the average). This effect is unexplained by abnormal price reactions, traditional news, and analyst recommendations. Consistent with manager learning, the informativeness of social media strengthens after firms start corporate Twitter accounts. The informativeness is driven by longer acquisition‐related tweets by fundamental investors, rather than memes and price trend tweets. These findings suggest that social media signals can be important for corporate decisions.

Asset Pricing and Risk‐Sharing Implications of Alternative Pension Plan Systems

Version of Record online: 10/7/2025  |  DOI: 10.1111/jofi.13507

NUNO COIMBRA, FRANCISCO GOMES, ALEXANDER MICHAELIDES, JIALU SHEN

We show that incorporating defined benefit pension funds in an incomplete markets asset pricing model improves its ability to match the historical equity premium and riskless rate and has important risk‐sharing implications. We document the importance of the pension fund's size and asset demands, and a new risk channel arising from fluctuations in the fund's returns. We use our calibrated model to study the implications of a shift to an economy with defined contribution plans. The new steady state is characterized by a higher riskless rate and a lower equity premium. Consumption volatility increases for retirees but decreases for workers.

Subtle Discrimination

Version of Record online: 10/6/2025  |  DOI: 10.1111/jofi.13506

ELENA S. PIKULINA, DANIEL FERREIRA

We introduce the concept of subtle discrimination—biased acts that cannot be objectively ascertained as discriminatory. When candidates compete for promotions by investing in skills, firms' subtle biases induce discriminated candidates to overinvest when promotions are low‐stakes (to distinguish themselves from favored candidates) but underinvest in high‐stakes settings (anticipating low promotion probabilities). This asymmetry implies that subtle discrimination raises profits in low‐productivity firms but lowers them in high‐productivity firms. Although subtle biases are small, they generate large gaps in skills and promotion outcomes. We derive further predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.