The Benefits of Access: Evidence from Private Meetings with Portfolio Firms
Version of Record online: 2/22/2026 | DOI: 10.1111/jofi.13495
MARCO BECHT, JULIAN FRANKS, HANNES F. WAGNER
We use large language models to analyze the content of 4,700 private meetings between a large active asset manager and its portfolio firms. The high‐level meetings convey mostly soft information about the firm, and little about industry or market. Fund manager meetings focus on business models and financial metrics, while governance specialist meetings focus on environmental, social, and governance risks; 0.4% of meetings discuss material nonpublic information. Trades by fund managers increase with meetings attended by senior management, rated as unusually good or bad, where the tone is significantly positive or negative, or assessed as creating consensus. Meeting‐informed portfolios can generate significant outperformance.
Carbon Pricing versus Green Finance
Version of Record online: 2/8/2026 | DOI: 10.1111/jofi.70022
LASSE HEJE PEDERSEN
Green finance—including environmental, social, and governance investing and sustainable finance regulations—is widespread, but can it substitute for carbon pricing in fighting climate change? In a unified model, I show that (i) when carbon prices reflect the social cost of carbon, green finance should not be used; (ii) when carbon prices are too low, green finance can implement the social optimum if each firm's cost of capital can be set to its
Competition Enforcement and Accounting for Intangible Capital
Version of Record online: 2/6/2026 | DOI: 10.1111/jofi.70028
JOHN D. KEPLER, CHARLES G. MCCLURE, CHRISTOPHER R. STEWART
Antitrust laws mandate review of mergers and acquisitions (M&As) that exceed an asset size threshold based on accounting standards that exclude most intangible capital. We show that this exclusion leads to thousands of intangible‐intensive M&As being nonreportable. Acquirers in nonreportable deals achieve higher equity values and price markups, especially when consolidating product markets. Furthermore, nonreportable pharmaceutical deals are three times more likely to involve overlapping drug projects, which are subsequently 40% more likely to be terminated. Our results suggest that the growth of intangible assets may exacerbate market power through nonreportable consolidation of the sectors most concerning for consumers.
Monetary Policy, Inflation, and Crises: Evidence from History and Administrative Data
Version of Record online: 1/27/2026 | DOI: 10.1111/jofi.70023
GABRIEL JIMÉNEZ, DMITRY KUVSHINOV, JOSÉ‐LUIS PEYDRÓ, BJÖRN RICHTER
We show that a U‐shaped monetary rate path increases banking crisis risk, via credit and asset price cycles, analyzing 17 countries over 150 years. Rate hikes (raw or instrumented) increase crisis risk, but only if preceded by prolonged cuts. These patterns are unique to banking crises, unlike noncrisis recessions. Regarding the mechanism, prolonged cuts raise the likelihood of large credit and asset price booms, consistent with higher credit supply and risk‐taking. Subsequent hikes strongly reduce credit and asset prices, and increase banks' realized credit risk, rather than interest rate risk. We find consistent results in administrative loan‐level data for Spain.
Monetary Policy and Wealth Effects: The Role of Risk and Heterogeneity
Version of Record online: 1/27/2026 | DOI: 10.1111/jofi.70021
NICOLAS CARAMP, DEJANIR H. SILVA
We study the role of asset revaluation in the monetary transmission mechanism. We build an analytical heterogeneous‐agents model with two main ingredients: (i) rare disasters and (ii) heterogeneous beliefs. The model captures time‐varying risk premia and precautionary savings in a setting that nests the textbook New Keynesian model. The model generates large movements in asset prices after a monetary shock but these movements can be neutral on real variables. Real effects depend on the redistribution among agents with heterogeneous precautionary motives. In quantitative analysis, we find that this channel can account for a large fraction of the transmission to aggregate consumption.
Version of Record online: 1/27/2026 | DOI: 10.1111/jofi.70025
VANIA STAVRAKEVA, JENNY TANG
Conventional wisdom holds that lowering a home country's interest rate relative to another's will depreciate the domestic currency. We document that, at business‐cycle frequencies, U.S. forward guidance monetary policy easings had the opposite effect during the Great Recession. We attribute this effect to calendar‐based forward guidance that signaled economic weakness, resulting in a “flight‐to‐safety” effect and lower expected U.S. inflation. We also document cross‐currency heterogeneity: a surprise U.S. rate cut induced a larger appreciation of the dollar against currencies that typically depreciate more when the world economy is contracting. We build a model that can reconcile these findings.
Bank Monitoring with On‐Site Inspections
Version of Record online: 1/22/2026 | DOI: 10.1111/jofi.70026
Amanda Rae Heitz, Christopher Martin, Alexander Ufier
Using proprietary transaction‐level data on nonsyndicated construction loans, we provide some of the first empirical evidence on the drivers and consequences of bank monitoring through on‐site inspections. Banks trade off monitoring intensity with favorable origination terms. Monitoring intensity escalates in response to local economic downturns or the bank's financial instability. Borrowers with negative inspection reports have more draw requests denied, suggesting that monitoring outcomes impact credit decisions. Both the occurrence and threat of increased inspection frequency correspond to reduced defaults. Overall, our results provide empirical support for a substantial body of theoretical literature on bank monitoring.
Investor Composition and the Liquidity Component in the U.S. Corporate Bond Market
Version of Record online: 1/21/2026 | DOI: 10.1111/jofi.70024
JIAN LI, HAIYUE YU
The link between corporate bond credit spreads and secondary market illiquidity in the cross section has grown stronger since 2005, resulting in a higher liquidity component in credit spreads. Using U.S. investor holdings data, we show that short‐term investors (e.g., mutual funds/exchange‐traded funds [ETFs]) increase trading activities in the secondary market, amplifying the effect of secondary market frictions on prices. We provide a model featuring heterogeneous investors with different trading needs and heterogeneous bonds to investigate the impact of the rapid‐growing mutual fund/ETF sector on the corporate bond market. We find the change in investor composition can quantitatively explain the aggregate trend.
Model Ambiguity versus Model Misspecification in Dynamic Portfolio Choice
Version of Record online: 1/21/2026 | DOI: 10.1111/jofi.70027
PASCAL J. MAENHOUT, HAO XING, ANNE G. BALTER
We study aversion to model ambiguity and misspecification in dynamic portfolio choice. Risk‐averse investors (relative risk aversion ) fear return persistence, while risk‐tolerant investors () fear mean reversion, when confronting model misspecification concerns of identically and independently distributed (IID) returns. The intuition is that risk‐averse investors, who want to hedge intertemporally, endogenously fear return persistence, which precludes hedging. A log investor is myopic and unaffected by model misspecification, therefore only worrying about model ambiguity. Our model can generate belief scarring, nonparticipation in equity markets, and extrapolative return expectations. Extending beyond IID returns, we study model misspecification for a mean‐reverting Sharpe ratio.
Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance
Version of Record online: 1/21/2026 | DOI: 10.1111/jofi.70007
CHRISTOPHER MARTIN, MANJU PURI, ALEXANDER UFIER
Using unique, daily, account‐level data, we investigate deposit outflows and inflows in a distressed bank. We observe an
Institutional Investor Attention
Version of Record online: 1/16/2026 | DOI: 10.1111/jofi.70009
ALAN KWAN, YUKUN LIU, BEN MATTHIES
Using data on Internet news reading, we measure fund‐level attention to both aggregate and firm‐specific news and relate it to fund portfolio allocation decisions. In the time series, we find that funds shift attention toward macroeconomic news during periods of high aggregate volatility. Those funds that exhibit stronger attention‐reallocation patterns earn higher future returns. In the cross‐section of fund portfolios, fund attention is positively related to stock holdings. Furthermore, fund attention to a stock increases the value‐add of that position to the fund's performance. This relationship is stronger using fund attention to more value‐relevant news 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.
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.