Search results: 50.
How Do Financing Constraints Affect Firms’ Equity Volatility?
Published: 3/9/2018, Volume: 73, Issue: 3 | DOI: 10.1111/jofi.12610 | Cited by: 30
DANIEL CARVALHO
Theory suggests that financing frictions can have significant implications for equity volatility by shaping firms’ exposure to economic risks. This paper provides evidence that an important determinant of higher equity volatility among research and development (R&D)‐intensive firms is fewer financing constraints on firms’ ability to access growth options. I provide evidence for this effect by studying how persistent shocks to the value of firms’ tangible assets (real estate) affect their subsequent equity volatility. The analysis addresses concerns about the identification of these balance sheet effects and shows that these effects are consistent with broader patterns on the equity volatility of R&D‐intensive firms.
The Real Effects of Government‐Owned Banks: Evidence from an Emerging Market
Published: 3/17/2014, Volume: 69, Issue: 2 | DOI: 10.1111/jofi.12130 | Cited by: 302
DANIEL CARVALHO
Using plant‐level data for Brazilian manufacturing firms, this paper provides evidence that government control over banks leads to significant political influence over the real decisions of firms. I find that firms eligible for government bank lending expand employment in politically attractive regions near elections. These expansions are associated with additional (favorable) borrowing from government banks. Further, these persistent expansions take place just before competitive elections, and are associated with lower future employment growth by firms in other regions. The analysis suggests that politicians in Brazil use bank lending to shift employment towards politically attractive regions and away from unattractive regions.
The Working Capital Credit Multiplier
Published: 8/27/2024, Volume: 79, Issue: 6 | DOI: 10.1111/jofi.13385 | Cited by: 18
HEITOR ALMEIDA, DANIEL CARVALHO, TAEHYUN KIM
We provide novel evidence that funding frictions can limit firms’ short‐term investments in receivables and inventories, reducing their production capacity. We propose a credit multiplier driven by these considerations and empirically isolate its importance by comparing how a similar firm responds to shocks differently when these shocks are initiated in their most profitable quarter (“main quarter”). We implement this test using recurring and unpredictable shocks (e.g., oil shocks) and provide extensive evidence supporting our identification strategy. Our results suggest that funding constraints and credit multiplier effects are significant for smaller firms that heavily rely on financing from suppliers.
The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity
Published: 10/14/2018, Volume: 73, Issue: 6 | DOI: 10.1111/jofi.12726 | Cited by: 171
JOHN (JIANQIU) BAI, DANIEL CARVALHO, GORDON M. PHILLIPS
We provide evidence that the deregulation of U.S. state banking markets leads to a significant increase in the relative employment and capital growth of local firms with higher productivity, and that this effect is concentrated among young firms. Using financial data for a broad range of firms, our analysis suggests that this effect is driven by a shift in the composition of local bank credit supply toward more productive firms. We estimate that this effect translates into economically important gains in aggregate industry productivity and that changes in the allocation of labor play a central role in driving these gains.
Local Bank Financial Constraints and Firm Access to External Finance
Published: 9/10/2008, Volume: 63, Issue: 5 | DOI: 10.1111/j.1540-6261.2008.01393.x | Cited by: 281
DANIEL PARAVISINI
I exploit the exogenous component of a formula‐based allocation of government funds across banks in Argentina to test for financial constraints and underinvestment by local banks. Banks are found to expand lending by $0.66 in response to an additional dollar of external financing. Using novel data to measure risk and return on marginal lending, I show that the profitability of lending does not decline and total borrower debt increases during lending expansions, holding investment opportunities constant. Overall, financial shocks to constrained banks are found to have a quick, persistent, and amplified effect on the aggregate supply of credit.
Makin's MARP A Comment
Published: 6/1981, Volume: 36, Issue: 3 | DOI: 10.1111/j.1540-6261.1981.tb00658.x | Cited by: 0
DANIEL FRIEDMAN
EFFECTS OF GENERAL CREDIT CONTROLS ON NON‐FARM RESIDENTIAL CONSTRUCTION*
Published: 3/1960, Volume: 15, Issue: 1 | DOI: 10.1111/j.1540-6261.1960.tb04842.x | Cited by: 0
Coldwell Daniel
A NOTE ON THE USELESSNESS OF TRANSACTION DEMAND MODELS*
Published: 12/1974, Volume: 29, Issue: 5 | DOI: 10.1111/j.1540-6261.1974.tb03137.x | Cited by: 1
Daniel Orr
BUSINESS TAX PROVISIONS OF THE 1962 AND 1964 ACTS
Published: 5/1965, Volume: 20, Issue: 2 | DOI: 10.1111/j.1540-6261.1965.tb00209.x | Cited by: 0
Daniel M. Holland
ASPECTS OF FEDERAL RESERVE POLICY, 1951–59 FACTS AND CONTROVERSIES*
Published: 9/1962, Volume: 17, Issue: 3 | DOI: 10.1111/j.1540-6261.1962.tb04329.x | Cited by: 0
Daniel S. Ahearn
RESERVE MEASURES AS OPERATING VARIABLES OF MONETARY POLICY: AN EMPIRICAL ANALYSIS
Published: 6/1976, Volume: 31, Issue: 3 | DOI: 10.1111/j.1540-6261.1976.tb01928.x | Cited by: 1
Daniel E. Laufenberg
Discussion
Published: 8/2000, Volume: 55, Issue: 4 | DOI: 10.1111/0022-1082.00268 | Cited by: 0
Daniel G. Weaver
THE ECONOMIC IMPACT OF LIFE INSURANCE INVESTMENTS ON THE AMERICAN ECONOMY*
Published: 3/1959, Volume: 14, Issue: 1 | DOI: 10.1111/j.1540-6261.1959.tb00491.x | Cited by: 1
Daniel E. Diamond
SOME OBSERVATIONS ON RECENT STUDIES OF INVESTMENT RISK*
Published: 5/1953, Volume: 8, Issue: 2 | DOI: 10.1111/j.1540-6261.1953.tb01147.x | Cited by: 0
Eleanor Bagley Daniel
LIQUID ASSETS: A NEGLECTED FACTOR IN THE FORMULATION OF HOUSING FINANCE POLICIES1
Published: 12/1952, Volume: 7, Issue: 4 | DOI: 10.1111/j.1540-6261.1952.tb02482.x | Cited by: 0
Daniel B. Rathbun
DIVIDEND UNDERREPORTING ON TAX RETURNS
Published: 5/1958, Volume: 13, Issue: 2 | DOI: 10.1111/j.1540-6261.1958.tb04192.x | Cited by: 1
Daniel M. Holland
PROCESS OF ECONOMIC ADAPTATION IN A WORLD WAR II NEUTRAL: A CASE STUDY OF SWEDEN*
Published: 9/1961, Volume: 16, Issue: 3 | DOI: 10.1111/j.1540-6261.1961.tb02841.x | Cited by: 0
Daniel James Edwards
An Analysis of the Impact of Interest Rate Ceilings
Published: 9/1982, Volume: 37, Issue: 4 | DOI: 10.1111/j.1540-6261.1982.tb03590.x | Cited by: 13
DANIEL J. VILLEGAS
The first aim of this study is to estimate the interest rates paid for motor vehicle loans. The second aim is to identify those potential borrowers most likely to be rationed out of the market by the imposition of rate ceilings. Rate ceilings constrain the rates paid by successful loan applicants to be no greater than the applicable ceiling level. These constraints are dealt with by treating the interest rate paid as a variable truncated at the ceiling level. Assuming the dependent variable is truncated normal, consistent estimates are obtained by employing the maximum likelihood method of Hausman and Wise.
Mutual Fund Advisory Contracts: An Empirical Investigation
Published: 2/2002, Volume: 57, Issue: 1 | DOI: 10.1111/1540-6261.00417 | Cited by: 118
Daniel N. Deli
We investigate marginal compensation rates in mutual fund advisory contracts and find the following. Equity and foreign fund advisors receive higher marginal compensation than debt and domestic fund advisors. Advisors of funds with greater turnover receive higher marginal compensation. Also, closedend fund advisors receive higher marginal compensation than open‐end fund advisors. Finally, we find that marginal compensation is lower for advisors of large funds and members of large fund families. We argue that these differences in marginal compensation reflect differences in advisor marginal product, differences in the difficulty of monitoring performance, differences in control environments, and scale economies.
Glued to the TV: Distracted Noise Traders and Stock Market Liquidity
Published: 2/12/2020, Volume: 75, Issue: 2 | DOI: 10.1111/jofi.12863 | Cited by: 217
JOEL PERESS, DANIEL SCHMIDT
In this paper, we study the impact of noise traders’ limited attention on financial markets. Specifically, we exploit episodes of sensational news (exogenous to the market) that distract noise traders. We find that on “distraction days,” trading activity, liquidity, and volatility decrease, and prices reverse less among stocks owned predominantly by noise traders. These outcomes contrast sharply with those due to the inattention of informed speculators and market makers, and are consistent with noise traders mitigating adverse selection risk. We discuss the evolution of these outcomes over time and the role of technological changes.
Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market
Published: 12/1988, Volume: 43, Issue: 5 | DOI: 10.1111/j.1540-6261.1988.tb03963.x | Cited by: 18
WALTER WASSERFALLEN, DANIEL WYDLER
The pricing of newly issued bonds on the Swiss capital market is investigated over the years 1980–1982. The results reveal a slight underpricing of new bonds at the issue date that is roughly equal to the difference in transactions costs between the markets for new and seasoned bonds. Underpricing is no longer observed when the new bonds start to be traded on the stock exchange, that is, after about two days. Tests of several hypotheses show that unexpected changes in interest rates over the offering period explain part of the underpricing.
Can Markets Discipline Government Agencies? Evidence from the Weather Derivatives Market
Published: 1/14/2016, Volume: 71, Issue: 1 | DOI: 10.1111/jofi.12366 | Cited by: 23
AMIYATOSH PURNANANDAM, DANIEL WEAGLEY
We analyze the role of financial markets in shaping the incentives of government agencies using a unique empirical setting: the weather derivatives market. We show that the introduction of weather derivative contracts on the Chicago Mercantile Exchange (CME) improves the accuracy of temperature measurement by 13% to 20% at the underlying weather stations. We argue that temperature‐based financial markets generate additional scrutiny of the temperature data measured by the National Weather Service, which motivates the agency to minimize measurement errors. Our results have broader implications: the visibility and scrutiny generated by financial markets can potentially improve the efficiency of government agencies.
Market Reactions to Tangible and Intangible Information
Published: 8/2006, Volume: 61, Issue: 4 | DOI: 10.1111/j.1540-6261.2006.00884.x | Cited by: 800
KENT DANIEL, SHERIDAN TITMAN
The book‐to‐market effect is often interpreted as evidence of high expected returns on stocks of “distressed” firms with poor past performance. We dispute this interpretation. We find that while a stock's future return is unrelated to the firm's past accounting‐based performance, it is strongly negatively related to the “intangible” return, the component of its past return that is orthogonal to the firm's past performance. Indeed, the book‐to‐market ratio forecasts returns because it is a good proxy for the intangible return. Also, a composite equity issuance measure, which is related to intangible returns, independently forecasts returns.
Prestige, Promotion, and Pay
Published: 12/21/2023, Volume: 79, Issue: 1 | DOI: 10.1111/jofi.13301 | Cited by: 15
DANIEL FERREIRA, RADOSLAWA NIKOLOWA
We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less prestigious entry‐level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entry‐level employees (“associates”) compete for better‐paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.
Evidence on the Characteristics of Cross Sectional Variation in Stock Returns
Published: 3/1997, Volume: 52, Issue: 1 | DOI: 10.1111/j.1540-6261.1997.tb03806.x | Cited by: 1172
KENT DANIEL, SHERIDAN TITMAN
Firm sizes and book‐to‐market ratios are both highly correlated with the average returns of common stocks. Fama and French (1993) argue that the association between these characteristics and returns arise because the characteristics are proxies for nondiversifiable factor risk. In contrast, the evidence in this article indicates that the return premia on small capitalization and high book‐to‐market stocks does not arise because of the comovements of these stocks with pervasive factors. It is the characteristics rather than the covariance structure of returns that appear to explain the cross‐sectional variation in stock returns.
Option Pricing When the Underlying Asset Earns a Below‐Equilibrium Rate of Return: A Note
Published: 3/1984, Volume: 39, Issue: 1 | DOI: 10.1111/j.1540-6261.1984.tb03874.x | Cited by: 85
ROBERT MCDONALD, DANIEL SIEGEL
Inside and Outside Information
Published: 6/10/2024, Volume: 79, Issue: 4 | DOI: 10.1111/jofi.13360 | Cited by: 9
DANIEL QUIGLEY, ANSGAR WALTHER
We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.
The Effect of Sequential Information Arrival on Asset Prices: An Experimental Study
Published: 7/1987, Volume: 42, Issue: 3 | DOI: 10.1111/j.1540-6261.1987.tb04585.x | Cited by: 72
THOMAS E. COPELAND, DANIEL FRIEDMAN
A complete understanding of security markets requires a simultaneous explanation of price behavior, trading volume, portfolio composition (ie., asset allocation), and bid‐ask spreads. In this paper, these variables are observed in a controlled setting—a computerized double auction market, similar to NASDAQ. Our laboratory allows experimental control of information arrival—whether simultaneously or sequentially received, and whether homogeneous or heterogeneous. We compare the price, volume, and share allocations of three market equilibrium models: telepathic rational expectations, which assumes that traders can read each others minds (strong‐form market efficiency); ordinary rational expectations, which assumes traders can use (some) market price information, (a type of semi‐strong form efficiency); and private information, where traders use no market information. We conclude 1) that stronger‐form market models predict equilibrium prices better than weaker‐form models, 2) that there were fewer misallocation forecasts in simultaneous information arrival (SIM) environments, 3) that trading volume was significantly higher in SIM environments, 4) and that bid‐ask spreads widen significantly when traders are exposed to price uncertainty resulting from information heterogeneity.
THE DEMAND FOR MONEY BY FIRMS: EXTENSIONS OF ANALYTIC RESULTS
Published: 12/1968, Volume: 23, Issue: 5 | DOI: 10.1111/j.1540-6261.1968.tb00314.x | Cited by: 46
Merton H. Miller, Daniel Orr
Subtle Discrimination
Published: 10/6/2025, Volume: 81, Issue: 1 | DOI: 10.1111/jofi.13506 | Cited by: 5
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.
The Allocation of Socially Responsible Capital
Published: 1/22/2025, Volume: 80, Issue: 2 | DOI: 10.1111/jofi.13425 | Cited by: 47
DANIEL GREEN, BENJAMIN N. ROTH
Portfolio allocation decisions increasingly incorporate social values. We develop a tractable framework to study how competition between investors to own socially valuable assets affects social welfare. Relative to the most common social‐investing strategies, we identify alternative strategies that result in higher impact and higher financial returns. We identify strategies for investors to have impact when impact is difficult to measure. From the firm's perspective, increasing profitability can have greater impact than directly increasing social value. We present new empirical evidence on the social preferences of investors that demonstrates the practical relevance of our theory.
A Theory of Friendly Boards
Published: 1/11/2007, Volume: 62, Issue: 1 | DOI: 10.1111/j.1540-6261.2007.01206.x | Cited by: 1885
RENÉE B. ADAMS, DANIEL FERREIRA
We analyze the consequences of the board's dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade‐off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management‐friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis.
A Theory of Pyramidal Ownership and Family Business Groups
Published: 12/2006, Volume: 61, Issue: 6 | DOI: 10.1111/j.1540-6261.2006.01001.x | Cited by: 636
HEITOR V. ALMEIDA, DANIEL WOLFENZON
We provide a new rationale for pyramidal ownership in family business groups. A pyramid allows a family to access all retained earnings of a firm it already controls to set up a new firm, and to share the new firm's nondiverted payoff with shareholders of the original firm. Our model is consistent with recent evidence of a small separation between ownership and control in some pyramids, and can differentiate between pyramids and dual‐class shares, even when either method can achieve the same deviation from one share–one vote. Other predictions of the model are consistent with both systematic and anecdotal evidence.
Partial Revelation of Information in Experimental Asset Markets
Published: 3/1991, Volume: 46, Issue: 1 | DOI: 10.1111/j.1540-6261.1991.tb03752.x | Cited by: 45
THOMAS E. COPELAND, DANIEL FRIEDMAN
We develop a model of market efficiency assuming private information is partially revealed to uninformed traders via the behavior of those who are informed. This partial revelation of information (PRE) model is tested in fourteen computerized double auction laboratory markets. It explains the market value and allocation of purchased information, and asset allocations, better than either a fully revealing information model (FRE strong‐form efficiency) or a nonrevealing expectations model; but it takes second place to FRE in explaining asset prices. We conjecture that refined versions of PRE may provide insight into “technical analysis” and minibubbles in securities markets.
Investor Psychology and Security Market Under‐ and Overreactions
Published: 12/1998, Volume: 53, Issue: 6 | DOI: 10.1111/0022-1082.00077 | Cited by: 4187
Kent Daniel, David Hirshleifer, Avanidhar Subrahmanyam
We propose a theory of securities market under‐ and overreactions based on two well‐known psychological biases: investor overconfidence about the precision of private information; and biased self‐attribution, which causes asymmetric shifts in investors' confidence as a function of their investment outcomes. We show that overconfidence implies negative long‐lag autocorrelations, excess volatility, and, when managerial actions are correlated with stock mispricing, public‐event‐based return predictability. Biased self‐attribution adds positive short‐lag autocorrelations (“momentum”), short‐run earnings “drift,” but negative correlation between future returns and long‐term past stock market and accounting performance. The theory also offers several untested implications and implications for corporate financial policy.
Do Firms Hedge in Response to Tax Incentives?
Published: 4/2002, Volume: 57, Issue: 2 | DOI: 10.1111/1540-6261.00443 | Cited by: 674
John R. Graham, Daniel A. Rogers
There are two tax incentives for corporations to hedge: to increase debt capacity and interest tax deductions, and to reduce expected tax liability if the tax function is convex. We test whether these incentives affect the extent of corporate hedging with derivatives. Using an explicit measure of tax function convexity, we find no evidence that firms hedge in response to tax convexity. Our analysis does, however, indicate that firms hedge to increase debt capacity, with increased tax benefits averaging 1.1 percent of firm value. Our results also indicate that firms hedge because of expected financial distress costs and firm size.
THE ROLE OF GOVERNMENT IN THE SAN FRANCISCO BAY AREA MORTGAGE MARKET*
Published: 12/1951, Volume: 6, Issue: 4 | DOI: 10.1111/j.1540-6261.1951.tb04480.x | Cited by: 0
Paul F. Wendt, Daniel B. Rathbun
Liquidity Provision and the Organizational Form of NYSE Specialist Firms
Published: 4/2002, Volume: 57, Issue: 2 | DOI: 10.1111/1540-6261.00444 | Cited by: 34
Jay F. Coughenour, Daniel N. Deli
We examine the influence of NYSE specialist firm organizational form on the nature of liquidity provision. We compare closely held firms whose specialists provide liquidity with their own capital to widely held firms whose specialists provide liquidity with diffusely owned capital. We argue that specialists using their own capital have a greater incentive and ability to reduce adverse selection costs, but face a greater cost of capital. Differences in the proportion of spreads due to adverse selection costs, large trade frequency, the sensitivity between depth and spreads, and price stabilization support this argument.
How Much Does Racial Bias Affect Mortgage Lending? Evidence from Human and Algorithmic Credit Decisions
Published: 4/9/2025, Volume: 80, Issue: 3 | DOI: 10.1111/jofi.13444 | Cited by: 35
NEIL BHUTTA, AUREL HIZMO, DANIEL RINGO
We assess racial discrimination in mortgage approvals using confidential data on mortgage applications. Minority applicants tend to have lower credit scores and higher leverage, and are less likely to receive algorithmic approval from race‐blind automated underwriting systems (AUS). Observable applicant‐risk factors explain most of the racial disparities in lender denials. Further, exploiting the AUS data, we show there are risk factors we do not observe, and these factors at least partially explain the residual 1 to 2 percentage point denial gaps. We conclude that differential treatment plays a more limited role in generating denial disparities than previous research suggests.
Collateral Constraints and the Law of One Price: An Experiment
Published: 11/2018, Volume: 73, Issue: 6 | DOI: 10.1111/jofi.12722 | Cited by: 17
MARCO CIPRIANI, ANA FOSTEL, DANIEL HOUSER
We test the asset pricing implications of collateralized borrowing (that is, of using assets as collateral to borrow money) in the laboratory. To this purpose, we develop a general equilibrium model with collateral constraints amenable to laboratory implementation and gather experimental data. In the laboratory, assets that can be leveraged fetch higher prices than assets that cannot, even though assets' payoffs are identical in all states of the world. Collateral value, therefore, creates deviations from the Law of One Price. The spread between collateralizeable and noncollateralizeable assets is significant and quantitatively close to theoretical predictions.
Corporate Financial Policy, Information, and Market Expectations: An Empirical Investigation of Dividends
Published: 9/1987, Volume: 42, Issue: 4 | DOI: 10.1111/j.1540-6261.1987.tb03918.x | Cited by: 115
AHARON R. OFER, DANIEL R. SIEGEL
This paper documents a relationship between announcements of unexpected changes in financial policy and unexpected changes in performance of the firm. Using a new methodology that combines analysis of stock price movements and earnings forecast data, the authors provide evidence that analysts revise their earnings forecasts following the announcement of an unexpected dividend change by an amount positively related to the size of the unexpected dividend change. They also provide evidence that these revisions are positively related to the change in equity value surrounding the announcement. Further, they find that these revisions are consistent with rationality. Their results therefore provide direct evidence consistent with the hypothesis that unexpected dividend changes signal information about firm performance to market participants.
Specialization in Bank Lending: Evidence from Exporting Firms
Published: 6/20/2023, Volume: 78, Issue: 4 | DOI: 10.1111/jofi.13254 | Cited by: 155
DANIEL PARAVISINI, VERONICA RAPPOPORT, PHILIPP SCHNABL
We develop a novel approach for measuring bank specialization using granular data on borrower activities and apply it to Peruvian exporters and their banks. We find that borrowers seek credit from banks that specialize in their export destinations, both when expanding exports and when exporting to new countries. Firms experiencing country‐specific export demand shocks adjust borrowing disproportionately from specialized banks. Specialized bank credit supply shocks affect exports disproportionately to countries of specialization. Our results demonstrate that firm credit demand is bank‐ and activity‐specific, which reduces banking competition and affects the transmission and amplification of shocks through the banking sector.
Correlated Trading and Returns
Published: 4/2008, Volume: 63, Issue: 2 | DOI: 10.1111/j.1540-6261.2008.01334.x | Cited by: 194
DANIEL DORN, GUR HUBERMAN, PAUL SENGMUELLER
A German broker's clients place similar speculative trades and therefore tend to be on the same side of the market in a given stock during a given day, week, month, and quarter. Aggregate liquidity effects, short sale constraints, the systematic execution of limit orders (coordinated through price movements) or the correlated trading of other investors who pick off retail limit orders do not fully explain why retail investors trade similarly. Correlated market orders lead returns, presumably due to persistent speculative price pressure. Correlated limit orders also predict subsequent returns, consistent with executed limit orders being compensated for accommodating liquidity demands.
Monetary Policy and Reaching for Income
Published: 2/24/2021, Volume: 76, Issue: 3 | DOI: 10.1111/jofi.13004 | Cited by: 70
KENT DANIEL, LORENZO GARLAPPI, KAIRONG XIAO
Using data on individual portfolio holdings and on mutual fund flows, we find that low interest rates lead to significantly higher demand for income‐generating assets such as high‐dividend stocks and high‐yield bonds. We argue that this “reaching‐for‐income” phenomenon is driven by investors who follow the “living off income” rule‐of‐thumb. Our empirical analysis shows that this preference for current income affects both household portfolio choices and the prices of income‐generating assets. In addition, we explore the implications of reaching for income for capital allocation and the effectiveness of monetary policy.
Before an Analyst Becomes an Analyst: Does Industry Experience Matter?
Published: 3/21/2017, Volume: 72, Issue: 2 | DOI: 10.1111/jofi.12466 | Cited by: 305
DANIEL BRADLEY, SINAN GOKKAYA, XI LIU
Using hand‐collected biographical information on financial analysts from 1983 to 2011, we find that analysts making forecasts on firms in industries related to their preanalyst experience have better forecast accuracy, evoke stronger market reactions to earning revisions, and are more likely to be named Institutional Investor all‐stars. Plausibly exogenous losses of analysts with related industry experience have real financial market implications—changes in firms’ information asymmetry and price reactions are significantly larger than those of other analysts. Overall, industry expertise acquired from preanalyst work experience is valuable to analysts, consistent with the emphasis placed on their industry knowledge by institutional investors.
DISCUSSION
Published: 5/1963, Volume: 18, Issue: 2 | DOI: 10.1111/j.1540-6261.1963.tb00713.x | Cited by: 0
James R. Schlesinger, Daniel M. Holland
The Impact of the Financial Education of Executives on the Financial Practices of Medium and Large Enterprises
Published: 8/18/2025, Volume: 80, Issue: 5 | DOI: 10.1111/jofi.13476 | Cited by: 4
CLÁUDIA CUSTÓDIO, DIOGO MENDES, DANIEL METZGER
We study the impact of an MBA‐style executive education course in finance on corporate policies and firm performance targeting top managers of medium and large Mozambican enterprises. Using a randomized controlled trial, we find that the educational treatment induces changes in financial policies that improve firm performance. Specifically, a reduction in working capital (0.4 to 0.5 standard deviations) increases cash flow, and in turn long‐term investments. This effect operates primarily through a reduction in accounts receivable (0.4 to 1 standard deviations). Our findings show that targeted educational interventions can build managerial capital and enhance corporate performance by improving financial decision making among executives.
Non‐Deal Roadshows, Informed Trading, and Analyst Conflicts of Interest
Published: 11/21/2021, Volume: 77, Issue: 1 | DOI: 10.1111/jofi.13089 | Cited by: 69
DANIEL BRADLEY, RUSSELL JAME, JARED WILLIAMS
Non‐deal roadshows (NDRs) are private meetings between management and institutional investors, typically organized by sell‐side analysts. We find that around NDRs, local institutional investors trade heavily and profitably, while retail trading is significantly less informed. Analysts who sponsor NDRs issue significantly more optimistic recommendations and target prices, together with more “beatable” earnings forecasts, consistent with analysts issuing strategically biased forecasts to win NDR business. Our results suggest that NDRs result in a substantial information advantage for institutional investors and create significant conflicts of interests for the analysts who organize them.
Household Liquidity Constraints and Labor Market Outcomes: Evidence from a Danish Mortgage Reform
Published: 9/23/2023, Volume: 78, Issue: 6 | DOI: 10.1111/jofi.13277 | Cited by: 15
ALEX XI HE, DANIEL LE MAIRE
We study the causal effect of liquidity constraints on individual labor market outcomes by exploiting the 1992 mortgage reform in Denmark, which for the first time allowed homeowners to borrow against housing equity for nonhousing purposes. Following the reform, liquidity‐constrained homeowners increased debt levels and had higher earnings growth and lower employment rates. The option to borrow against housing equity enabled liquidity‐constrained individuals to move to high‐wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches, potentially increasing earnings and output in the longer run.
Public Information and Coordination: Evidence from a Credit Registry Expansion
Published: 3/21/2011, Volume: 66, Issue: 2 | DOI: 10.1111/j.1540-6261.2010.01637.x | Cited by: 154
ANDREW HERTZBERG, JOSÉ MARÍA LIBERTI, DANIEL PARAVISINI
This paper provides evidence that lenders to a firm close to distress have incentives to coordinate: lower financing by one lender reduces firm creditworthiness and causes other lenders to reduce financing. To isolate the coordination channel from lenders' joint reaction to new information, we exploit a natural experiment that forced lenders to share negative private assessments about their borrowers. We show that lenders, while learning nothing new about the firm, reduce credit in anticipation of other lenders' reaction to the negative news about the firm. The results show that public information exacerbates lender coordination and increases the incidence of firm financial distress.