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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Creditor Rights, Enforcement, and Bank Loans
Published: 03/13/2009 | DOI: 10.1111/j.1540-6261.2009.01450.x
KEE‐HONG BAE, VIDHAN K. GOYAL
We examine whether differences in legal protection affect the size, maturity, and interest rate spread on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of contracts by reducing loan amounts, shortening loan maturities, and increasing loan spreads. These effects are both statistically significant and economically large. While stronger creditor rights reduce spreads, they do not seem to matter for loan size and maturity. Overall, we show that variation in enforceability of contracts matters a great deal more to how loans are structured and how they are priced.
Limit Orders, Depth, and Volatility: Evidence from the Stock Exchange of Hong Kong
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00345
Hee‐Joon Ahn, Kee‐Hong Bae, Kalok Chan
We investigate the role of limit orders in the liquidity provision in a pure order‐driven market. Results show that market depth rises subsequent to an increase in transitory volatility, and transitory volatility declines subsequent to an increase in market depth. We also examine how transitory volatility affects the mix between limit orders and market orders. When transitory volatility arises from the ask (bid) side, investors will submit more limit sell (buy) orders than market sell (buy) orders. This result is consistent with the existence of limit‐order traders who enter the market and place orders when liquidity is needed.
Tunneling or Value Added? Evidence from Mergers by Korean Business Groups
Published: 12/17/2002 | DOI: 10.1111/1540-6261.00510
Kee‐Hong Bae, Jun‐Koo Kang, Jin‐Mo Kim
We examine whether firms belonging to Korean business groups (chaebols) benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms (tunneling). We find that when a chaebol‐affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebol‐affiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis.