The Journal of Finance

Creditor Control Rights and Board Independence

Published: 7/12/2018,  Volume: 73,  Issue: 5  |  DOI: 10.1111/jofi.12692  |  Cited by: 116

DANIEL FERREIRA, MIGUEL A. FERREIRA, BEATRIZ MARIANO

We find that the number of independent directors on corporate boards increases by approximately 24% following financial covenant violations in credit agreements. Most of these new directors have links to creditors. Firms that appoint new directors after violations are more likely to issue new equity, and to decrease payout, operational risk, and CEO cash compensation, than firms without such appointments. We conclude that a firm's board composition, governance, and policies are shaped by current and past credit agreements.

Corporate Governance, Idiosyncratic Risk, and Information Flow

Published: 3/20/2007,  Volume: 62,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2007.01228.x  |  Cited by: 621

MIGUEL A. FERREIRA, PAUL A. LAUX

We study the relationship of corporate governance policy and idiosyncratic risk. Firms with fewer antitakeover provisions display higher levels of idiosyncratic risk, trading activity, private information flow, and information about future earnings in stock prices. Trading interest by institutions, especially those active in merger arbitrage, strengthens the relationship of governance to idiosyncratic risk. Our results indicate that openness to the market for corporate control leads to more informative stock prices by encouraging collection of and trading on private information. Consistent with an information‐flow interpretation, the component of volatility unrelated to governance is associated with the efficiency of corporate investment.

Asset Management within Commercial Banking Groups: International Evidence

Published: 7/24/2018,  Volume: 73,  Issue: 5  |  DOI: 10.1111/jofi.12702  |  Cited by: 93

MIGUEL A. FERREIRA, PEDRO MATOS, PEDRO PIRES

We study the performance of equity mutual funds run by asset management divisions of commercial banking groups using a worldwide sample. We show that bank‐affiliated funds underperform unaffiliated funds by 92 basis points per year. Consistent with conflicts of interest, the underperformance is more pronounced among those affiliated funds that overweight the stock of the bank's lending clients to a great extent. Divestitures of asset management divisions by banking groups support a causal interpretation of the results. Our findings suggest that affiliated fund managers support their lending divisions’ operations to reduce career concerns at the expense of fund investors.

The Real Effects of Credit Ratings: The Sovereign Ceiling Channel

Published: 1/12/2017,  Volume: 72,  Issue: 1  |  DOI: 10.1111/jofi.12434  |  Cited by: 278

HEITOR ALMEIDA, IGOR CUNHA, MIGUEL A. FERREIRA, FELIPE RESTREPO

We show that sovereign debt impairments can have a significant effect on financial markets and real economies through a credit ratings channel. Specifically, we find that firms reduce their investment and reliance on credit markets due to a rising cost of debt capital following a sovereign rating downgrade. We identify these effects by exploiting exogenous variation in corporate ratings due to rating agencies' sovereign ceiling policies, which require that firms' ratings remain at or below the sovereign rating of their country of domicile.

QUANTIFICATION AND MEASUREMENT OF RISK: AN EMPIRICAL STUDY OF SELECTED COMMON STOCKS*

Published: 9/1967,  Volume: 22,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1967.tb02987.x  |  Cited by: 0

Charles Griffiths Ferreira

Connected Stocks

Published: 5/8/2014,  Volume: 69,  Issue: 3  |  DOI: 10.1111/jofi.12149  |  Cited by: 395

MIGUEL ANTÓN, CHRISTOPHER POLK

We connect stocks through their common active mutual fund owners. We show that the degree of shared ownership forecasts cross‐sectional variation in return correlation, controlling for exposure to systematic return factors, style and sector similarity, and many other pair characteristics. We argue that shared ownership causes this excess comovement based on evidence from a natural experiment—the 2003 mutual fund trading scandal. These results motivate a novel cross‐stock‐reversal trading strategy exploiting information contained in ownership connections. We show that long‐short hedge fund index returns covary negatively with this strategy, suggesting these funds may exacerbate this excess comovement.

Prestige, Promotion, and Pay

Published: 12/21/2023,  Volume: 79,  Issue: 1  |  DOI: 10.1111/jofi.13301  |  Cited by: 13

DANIEL FERREIRA, RADOSLAWA NIKOLOWA

We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less prestigious entry‐level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entry‐level employees (“associates”) compete for better‐paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.

Subtle Discrimination

Published: 10/6/2025,  Volume: 81,  Issue: 1  |  DOI: 10.1111/jofi.13506  |  Cited by: 5

ELENA S. PIKULINA, DANIEL FERREIRA

We introduce the concept of subtle discrimination —biased acts that cannot be objectively ascertained as discriminatory. When candidates compete for promotions by investing in skills, firms' subtle biases induce discriminated candidates to overinvest when promotions are low‐stakes (to distinguish themselves from favored candidates) but underinvest in high‐stakes settings (anticipating low promotion probabilities). This asymmetry implies that subtle discrimination raises profits in low‐productivity firms but lowers them in high‐productivity firms. Although subtle biases are small, they generate large gaps in skills and promotion outcomes. We derive further predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.

A Theory of Friendly Boards

Published: 1/11/2007,  Volume: 62,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2007.01206.x  |  Cited by: 1894

RENÉE B. ADAMS, DANIEL FERREIRA

We analyze the consequences of the board's dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade‐off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management‐friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis.

Favoritism in Mutual Fund Families? Evidence on Strategic Cross‐Fund Subsidization

Published: 1/20/2006,  Volume: 61,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2006.00830.x  |  Cited by: 455

JOSÉ‐MIGUEL GASPAR, MASSIMO MASSA, PEDRO MATOS

We investigate whether mutual fund families strategically transfer performance across member funds to favor those more likely to increase overall family profits. We find that “high family value” funds (i.e., high fees or high past performers) overperform at the expense of “low value” funds. Such a performance gap is above the one existing between similar funds not affiliated with the same family. Better allocations of underpriced initial public offering deals and opposite trades across member funds partly explain why high value funds overperform. Our findings highlight how the family organization prevalent in the mutual fund industry generates distortions in delegated asset management.

Episodic Liquidity Crises: Cooperative and Predatory Trading

Published: 9/4/2007,  Volume: 62,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2007.01274.x  |  Cited by: 226

BRUCE IAN CARLIN, MIGUEL SOUSA LOBO, S. VISWANATHAN

We describe how episodic illiquidity arises from a breakdown in cooperation between market participants. We first solve a one‐period trading game in continuous‐time, using an asset pricing equation that accounts for the price impact of trading. Then, in a multi‐period framework, we describe an equilibrium in which traders cooperate most of the time through repeated interaction, providing apparent liquidity to one another. Cooperation breaks down when the stakes are high, leading to predatory trading and episodic illiquidity. Equilibrium strategies that involve cooperation across markets lead to less frequent episodic illiquidity, but cause contagion when cooperation breaks down.