The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
AFA members can log in to view full-text articles below.
View past issues
Search the Journal of Finance:
Search results: 7.
Do Financial Institutions Matter?
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00361
Franklin Allen
In standard asset pricing theory, investors are assumed to invest directly in financial markets. The role of financial institutions is ignored. The focus in corporate finance is on agency problems. How do you ensure that managers act in shareholders' interests? There is an inconsistency in assuming that when you give your money to a financial institution there is no agency problem, but when you give it to a firm there is. It is argued that both areas need to take proper account of the role of financial institutions and markets. Appropriate concepts for analyzing particular situations should be used.
Selection Editor's Introduction
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00258
Franklin Allen
The Prevention of Default
Published: 05/01/1981 | DOI: 10.1111/j.1540-6261.1981.tb00439.x
FRANKLIN ALLEN
Rational Expectations and the Measurement of a Stock's Elasticity of Demand
Published: 09/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb03896.x
FRANKLIN ALLEN, ANDREW POSTLEWAITE
Scholes [1] considered the effect of secondary sales of large blocks of stock on the price of the stock. However, he only looked at price changes occurring just before and just after the sale took place. It is argued here, using a simple model, that if traders have rational expectations they may anticipate the sale, and prices could reflect this possibility long before it actually occurs. To determine the full effect, it may therefore be necessary to consider the price path many months, or even years, before the sale.
Optimal Financial Crises
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00052
Franklin Allen, Douglas Gale
Empirical evidence suggests that banking panics are related to the business cycle and are not simply the result of “sunspots.” Panics occur when depositors perceive that the returns on bank assets are going to be unusually low. We develop a simple model of this. In this setting, bank runs can be first‐best efficient: they allow efficient risk sharing between early and late withdrawing depositors and they allow banks to hold efficient portfolios. However, if costly runs or markets for risky assets are introduced, central bank intervention of the right kind can lead to a Pareto improvement in welfare.
A Theory of Dividends Based on Tax Clienteles
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00298
Franklin Allen, Antonio E. Bernardo, Ivo Welch
This paper explains why some firms prefer to pay dividends rather than repurchase shares. When institutional investors are relatively less taxed than individual investors, dividends induce “ownership clientele” effects. Firms paying dividends attract relatively more institutions, which have a relative advantage in detecting high firm quality and in ensuring firms are well managed. The theory is consistent with some documented regularities, specifically both the presence and stickiness of dividends, and offers novel empirical implications, e.g., a prediction that it is the tax difference between institutions and retail investors that determines dividend payments, not the absolute tax payments.
Dissecting the Long‐Term Performance of the Chinese Stock Market
Published: 03/01/2024 | DOI: 10.1111/jofi.13312
FRANKLIN ALLEN, JUN (QJ) QIAN, CHENYU SHAN, JULIE LEI ZHU
Domestically listed Chinese (A‐share) firms have lower stock returns than externally listed Chinese, developed, and emerging country firms during 2000 to 2018. They also have lower net cash flows than matched unlisted Chinese firms. The underperformance of both stock and accounting returns is more pronounced for large A‐share firms, while small firms show no underperformance along either dimension. Investor sentiment explains low stock returns in the cross‐country and within‐A‐share samples. Institutional deficiencies in listing and delisting processes and weak corporate governance in terms of shareholder value creation are consistent with the underperformance in stock returns and net cash flows.