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.
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.