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.
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Search results: 6.
How Risky Are U.S. Corporate Assets?
Published: 1/2/2023, Volume: 78, Issue: 1 | DOI: 10.1111/jofi.13196 | Cited by: 9
TETIANA DAVYDIUK, SCOTT RICHARD, IVAN SHALIASTOVICH, AMIR YARON
We use market data on corporate bonds and equities to measure the value of U.S. corporate assets and their payouts to investors. In contrast to equity dividends, total corporate payouts are highly volatile, turn negative when corporations raise capital, and are acyclical. At the same time, corporate asset returns are similar to returns on equity, and both are exposed to fluctuations in economic growth. To reconcile this evidence, we argue that acyclical but volatile net repurchases mask the exposure of total payouts' cash components to economic growth risks. We develop an asset pricing framework to quantitatively illustrate this economic channel.
Volatility, the Macroeconomy, and Asset Prices
Published: 11/10/2014, Volume: 69, Issue: 6 | DOI: 10.1111/jofi.12110 | Cited by: 302
RAVI BANSAL, DANA KIKU, IVAN SHALIASTOVICH, AMIR YARON
How important are volatility fluctuations for asset prices and the macroeconomy? We find that an increase in macroeconomic volatility is associated with an increase in discount rates and a decline in consumption. We develop a framework in which cash flow, discount rate, and volatility risks determine risk premia and show that volatility plays a significant role in explaining the joint dynamics of returns to human capital and equity. Volatility risk carries a sizable positive risk premium and helps account for the cross section of expected returns. Our evidence demonstrates that volatility is important for understanding expected returns and macroeconomic fluctuations.
CEO Horizon, Optimal Pay Duration, and the Escalation of Short‐Termism
Published: 3/26/2019, Volume: 74, Issue: 4 | DOI: 10.1111/jofi.12770 | Cited by: 109
IVAN MARINOVIC, FELIPE VARAS
This paper studies optimal contracts when managers manipulate their performance measure at the expense of firm value. Optimal contracts defer compensation. The manager's incentives vest over time at an increasing rate, and compensation becomes very sensitive to short‐term performance. This generates an endogenous horizon problem whereby managers intensify performance manipulation in their final years in office. Contracts are designed to encourage effort while minimizing the adverse effects of manipulation. We characterize the optimal mix of short‐ and long‐term compensation along the manager's tenure, the optimal vesting period of incentive pay, and the dynamics of short‐termism over the CEO's tenure.
On the Relevance of Debt Maturity Structure
Published: 12/1985, Volume: 40, Issue: 5 | DOI: 10.1111/j.1540-6261.1985.tb02392.x | Cited by: 228
IVAN E. BRICK, S. ABRAHAM RAVID
In this paper, we present a tax‐induced framework to analyze debt maturity problems. We show that under some modifications of the existing U.S. tax code, debt maturity is irrelevant even in the presence of taxes and bankruptcy costs that yield an optimal capital structure. If this restrictive structure is relaxed, and assuming the Miller [15] equilibrium does not prevail, tax reasons would usually imply the existence of an optimal debt maturity structure. If there exists a gain from leverage, then an increasing term structure of interest rates, adjusted for default risk, results in long‐term debt being optimal. A decreasing term structure, under similar circumstances, renders short‐term debt optimal. In the absence of agency costs, a Miller [15]‐type result emerges at equilibrium and irrelevance prevails. We also argue that agency costs could again reverse the irrelevance and imply a firm‐specific optimal debt maturity structure.
Taxes and the Theory of Trade Debt
Published: 9/1984, Volume: 39, Issue: 4 | DOI: 10.1111/j.1540-6261.1984.tb03900.x | Cited by: 48
IVAN E. BRICK, WILLIAM K. H. FUNG
In this paper, we show that taxes motivate the flow of trade credit without involving the assumption of credit market imperfections. The direction of trade credit flow depends on the distribution of marginal tax rates among buyers and sellers. In equilibrium, the trade credit decision follows a tax‐induced clientele on both the supply and demand side.
Weathering Cash Flow Shocks
Published: 5/10/2021, Volume: 76, Issue: 4 | DOI: 10.1111/jofi.13024 | Cited by: 282
JAMES R. BROWN, MATTHEW T. GUSTAFSON, IVAN T. IVANOV
Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank‐borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower‐friendly loan provisions. Credit line adjustments occur within one calendar quarter of the shock and persist for at least nine months. Overall, we provide evidence that bank credit lines are an important tool for managing the nonfundamental component of cash flow volatility, especially for solvent, small bank borrowers.