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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Incentive Effects of Stock and Option Holdings of Target and Acquirer CEOs
Published: 8/2007, Volume: 62, Issue: 4 | DOI: 10.1111/j.1540-6261.2007.01260.x | Cited by: 110
JIE CAI, ANAND M. VIJH
Acquisitions enable target chief executive officers (CEOs) to remove liquidity restrictions on stock and option holdings and diminish the illiquidity discount. Acquisitions also enable acquirer CEOs to improve the long‐term value of overvalued holdings. Examining all firms during 1993 to 2001, we show that CEOs with higher holdings (illiquidity discount) are more likely to make acquisitions (get acquired). Further, in 250 completed acquisitions, target CEOs with a higher illiquidity discount accept a lower premium, offer less resistance, and more often leave after acquisition. Similarly, acquirer CEOs with higher holdings pay a higher premium, expedite the process, and make diversifying acquisitions using stock payment.
Electing Directors
Published: 9/28/2009, Volume: 64, Issue: 5 | DOI: 10.1111/j.1540-6261.2009.01504.x | Cited by: 484
JIE CAI, JACQUELINE L. GARNER, RALPH A. WALKLING
Using a large sample of director elections, we document that shareholder votes are significantly related to firm performance, governance, director performance, and voting mechanisms. However, most variables, except meeting attendance and ISS recommendations, have little economic impact on shareholder votes—even poorly performing directors and firms typically receive over 90% of votes cast. Nevertheless, fewer votes lead to lower “abnormal” CEO compensation and a higher probability of removing poison pills, classified boards, and CEOs. Meanwhile, director votes have little impact on election outcomes, firm performance, or director reputation. These results provide important benchmarks for the current debate on election reforms.
The Cost of Debt
Published: 11/9/2010, Volume: 65, Issue: 6 | DOI: 10.1111/j.1540-6261.2010.01611.x | Cited by: 265
JULES H. Van BINSBERGEN, JOHN R. GRAHAM, JIE YANG
We use exogenous variation in tax benefit functions to estimate firm‐specific cost of debt functions that are conditional on company characteristics such as collateral, size, and book‐to‐market. By integrating the area between the benefit and cost functions, we estimate that the equilibrium net benefit of debt is 3.5% of asset value, resulting from an estimated gross benefit (cost) of debt equal to 10.4% (6.9%) of asset value. We find that the cost of being overlevered is asymmetrically higher than the cost of being underlevered and that expected default costs constitute only half of the total ex ante costs of debt.
Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage‐Backed Securities
Published: 11/19/2012, Volume: 67, Issue: 6 | DOI: 10.1111/j.1540-6261.2012.01782.x | Cited by: 194
JIE (JACK) HE, JUN (QJ) QIAN, PHILIP E. STRAHAN
Initial yields on both AAA‐rated and non‐AAA rated mortgage‐backed security (MBS) tranches sold by large issuers are higher than yields on similar tranches sold by small issuers during the market boom years of 2004 to 2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004 to 2006. These results suggest that investors price the risk that large issuers received more inflated ratings than small issuers, especially during boom periods.
Testing Disagreement Models
Published: 6/8/2022, Volume: 77, Issue: 4 | DOI: 10.1111/jofi.13137 | Cited by: 101
YEN‐CHENG CHANG, PEI‐JIE HSIAO, ALEXANDER LJUNGQVIST, KEVIN TSENG
We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, which induces a reduction in investor disagreement. Consistent with models of investor disagreement, EDGAR inclusion helps resolve disagreement around information events, leading to stock price corrections. The reduction in disagreement following EDGAR inclusion also reduces stock price crash risk, especially among stocks with binding short‐sale constraints and high investor optimism.