The Journal of Finance

Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices

Published: 05/16/2006   |   DOI: 10.1111/j.1540-6261.2006.00879.x

MARIASSUNTA GIANNETTI, ANDREI SIMONOV

Using a data set that provides unprecedented detail on investors' stockholdings, we analyze whether investors take the quality of corporate governance into account when selecting stocks. We find that all categories of investors (domestic and foreign, institutional and small individual) who generally enjoy only security benefits are reluctant to invest in companies with weak corporate governance. In contrast, individuals connected with company insiders are more likely to invest in weak corporate governance companies. These findings suggest that it is important to distinguish between investors who enjoy private benefits or access private information, and investors who enjoy only security benefits.

Forced Asset Sales and the Concentration of Outstanding Debt: Evidence from the Mortgage Market

Published: 01/24/2017   |   DOI: 10.1111/jofi.12494

GIOVANNI FAVARA, MARIASSUNTA GIANNETTI

We provide evidence that lenders differ in their ex post incentives to internalize price‐default externalities associated with the liquidation of collateralized debt. Using the mortgage market as a laboratory, we conjecture that lenders with a large share of outstanding mortgages on their balance sheets internalize the negative spillovers associated with the liquidation of defaulting mortgages and thus are less inclined to foreclose. We provide evidence consistent with our conjecture. Arguably as a consequence, zip codes with a higher concentration of outstanding mortgages experience smaller house prices declines. These results are not driven by unobservable zip code or lender characteristics.

The Brain Gain of Corporate Boards: Evidence from China

Published: 08/06/2014   |   DOI: 10.1111/jofi.12198

MARIASSUNTA GIANNETTI, GUANMIN LIAO, XIAOYUN YU

We study the impact of directors with foreign experience on firm performance in emerging markets. Using a unique data set from China, we exploit the introduction of policies to attract talented emigrants and increase the supply of individuals with foreign experience in different provinces at different times. We document that performance increases after firms hire directors with foreign experience and identify the channels through which the emigration of talent may lead to a brain gain. Our findings provide evidence on how directors transmit knowledge about management practices and corporate governance to firms in emerging markets.

Corporate Scandals and Household Stock Market Participation

Published: 02/19/2016   |   DOI: 10.1111/jofi.12399

MARIASSUNTA GIANNETTI, TRACY YUE WANG

We show that, after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as nonfraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market.