The Journal of Finance

Leverage Choice and Credit Spreads when Managers Risk Shift

Published: 11/9/2010,  Volume: 65,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2010.01617.x  |  Cited by: 67

MURRAY CARLSON, ALI LAZRAK

We model the debt and asset risk choice of a manager with performance‐insensitive pay (cash) and performance‐sensitive pay (stock) to theoretically link compensation structure, leverage, and credit spreads. The model predicts that optimal leverage trades off the tax benefit of debt against the utility cost of ex‐post asset substitution and that credit spreads are increasing in the ratio of cash‐to‐stock. Using a large cross‐section of U.S.‐based corporate credit default swaps (CDS) covering 2001 to 2006, we find a positive association between cash‐to‐stock and CDS rates, and between cash‐to‐stock and leverage ratios.

Corporate Investment and Asset Price Dynamics: Implications for SEO Event Studies and Long‐Run Performance

Published: 5/16/2006,  Volume: 61,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2006.00865.x  |  Cited by: 281

MURRAY CARLSON, ADLAI FISHER, RON GIAMMARINO

We present a rational theory of SEOs that explains a pre‐issuance price run‐up, a negative announcement effect, and long‐run post‐issuance underperformance. When SEOs finance investment in a real options framework, expected returns decrease endogenously because growth options are converted into assets in place. Regardless of their risk, the new assets are less risky than the options they replace. Although both size and book‐to‐market effects are present, standard matching procedures fail to fully capture the dynamics of risk and expected return. We calibrate the model and show that it closely matches the primary features of SEO return dynamics.

Equilibrium Exhaustible Resource Price Dynamics

Published: 8/2007,  Volume: 62,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2007.01254.x  |  Cited by: 64

MURRAY CARLSON, ZEIGHAM KHOKHER, SHERIDAN TITMAN

We develop equilibrium models of exhaustible resource markets with endogenous extraction choices and prices. Our analysis demonstrates how adjustment costs can generate oil and gas forward price dynamics with two factors, consistent with the behavior these commodities exhibit in the Schwartz and Smith (2000) calibration. Our two‐factor model predicts that stochastic volatility will arise in these markets as a natural consequence of production adjustments, however, and we provide supporting empirical evidence. Differences between endogenous price processes from our general equilibrium model and exogenous processes in earlier papers can generate significant differences in both financial and real option values.

Corporate Investment and Asset Price Dynamics: Implications for the Cross‐section of Returns

Published: 12/2004,  Volume: 59,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2004.00709.x  |  Cited by: 580

MURRAY CARLSON, ADLAI FISHER, RON GIAMMARINO

We show that corporate investment decisions can explain the conditional dynamics in expected asset returns. Our approach is similar in spirit to Berk, Green, and Naik (1999), but we introduce to the investment problem operating leverage, reversible real options, fixed adjustment costs, and finite growth opportunities. Asset betas vary over time with historical investment decisions and the current product market demand. Book‐to‐market effects emerge and relate to operating leverage, while size captures the residual importance of growth options relative to assets in place. We estimate and test the model using simulation methods and reproduce portfolio excess returns comparable to the data.

DEMOCRATIZING MONEY

Published: 10/1947,  Volume: 2,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1947.tb00798.x  |  Cited by: 0

Valdemar Carlson

MEASURING PERIOD PROFITABILITY: BOOK YIELD VERSUS TRUE YIELD*

Published: 3/1965,  Volume: 20,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1965.tb00191.x  |  Cited by: 0

Robert Scott Carlson

THE EFFECT OF AN ACTIVE MARKET IN FEDERAL FUNDS ON THE TRANSMISSION OF MONETARY POLICY*

Published: 12/1970,  Volume: 25,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1970.tb00882.x  |  Cited by: 0

James Murray Boughton

INVESTMENT ASPECTS OF THE ACCUMULATION OF PENSION FUNDS

Published: 5/1952,  Volume: 7,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1952.tb01534.x  |  Cited by: 0

Roger F. Murray

RELUCTANCE ELASTICITY, LEAST COST, AND MEMBER‐BANK BORROWING: A SUGGESTED INTEGRATION

Published: 3/1960,  Volume: 15,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1960.tb04832.x  |  Cited by: 7

Murray E. Polakoff

PENSION FUNDS IN THE AMERICAN ECONOMY

Published: 5/1968,  Volume: 23,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1968.tb00808.x  |  Cited by: 0

Roger F. Murray

THE OUTLOOK FOR THE STOCK MARKET

Published: 5/1963,  Volume: 18,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1963.tb00733.x  |  Cited by: 0

Roger F. Murray

BRITISH AND AMERICAN SYSTEMS OF INCOME TAX WITHHOLDING*

Published: 9/1962,  Volume: 17,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1962.tb04317.x  |  Cited by: 0

Alan Page Murray

THE PENN CENTRAL DEBACLE: LESSONS FOR FINANCIAL ANALYSIS

Published: 5/1971,  Volume: 26,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1971.tb00900.x  |  Cited by: 10

Roger F. Murray

THE PANIC OF 1819: CONTEMPORARY OPINION AND POLICY*

Published: 9/1960,  Volume: 15,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1960.tb01609.x  |  Cited by: 0

Murray N. Rothbard

GOVERNMENT SPENDING: PROCESS AND MEASUREMENT*

Published: 3/1959,  Volume: 14,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1959.tb00501.x  |  Cited by: 0

Murray L. Weidenbaum

PREFACE

Published: 5/1964,  Volume: 19,  Issue: S2  |  DOI: 10.1111/j.1540-6261.1964.tb00175.x  |  Cited by: 0

Roger F. Murray

THE MARKET FOR EQUITIES

Published: 5/1964,  Volume: 19,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1964.tb00781.x  |  Cited by: 0

Roger F. Murray

MEMBER‐BANK BORROWING: A REJOINDER

Published: 3/1961,  Volume: 16,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1961.tb02798.x  |  Cited by: 1

Murray E. Polakoff

THE COST OF CAPITAL AS A WEIGHTED AVERAGE

Published: 12/1975,  Volume: 30,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1975.tb01060.x  |  Cited by: 20

Timothy J. Nantell, C. Robert Carlson

REPLY

Published: 3/1969,  Volume: 24,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1969.tb00350.x  |  Cited by: 0

C. Rangarajan, Murray E. Polakoff

Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards

Published: 6/2004,  Volume: 59,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2004.00662.x  |  Cited by: 1989

Werner Antweiler, Murray Z. Frank

Financial press reports claim that Internet stock message boards can move markets. We study the effect of more than 1.5 million messages posted on Yahoo! Finance and Raging Bull about the 45 companies in the Dow Jones Industrial Average and the Dow Jones Internet Index. Bullishness is measured using computational linguistics methods. Wall Street Journal news stories are used as controls. We find that stock messages help predict market volatility. Their effect on stock returns is statistically significant but economically small. Consistent with Harris and Raviv (1993) , disagreement among the posted messages is associated with increased trading volume.

DISCUSSION

Published: 5/1961,  Volume: 16,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1961.tb02832.x  |  Cited by: 0

Paul P. Harbrect, Roger F. Murray

RELUCTANCE AND MEMBER‐BANK BORROWING: ADDITIONAL EVIDENCE

Published: 3/1967,  Volume: 22,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1967.tb01660.x  |  Cited by: 5

MURRAY E. POLAKOFF, WILLIAM L. SILBER

A REPLY

Published: 9/1971,  Volume: 26,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1971.tb00932.x  |  Cited by: 1

William L. Silber, Murray E. Polakoff

Economies of Scale and Economies of Scope in Multiproduct Financial Institutions: A Study of British Columbia Credit Unions

Published: 6/1983,  Volume: 38,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1983.tb02508.x  |  Cited by: 169

JOHN D. MURRAY, ROBERT W. WHITE

This paper investigates the production technology facing computerized credit unions in Canada. A full system of translog cost equations is estimated in order to test for economies of scale, economies of scope, and other production characteristics in a multiproduct context. The regression results indicate that most of the credit unions in our sample experience significant increasing returns to scale as they expand their level of output. There is also evidence of cost complementarity or economies of scope in their mortgage and other lending activities. As a result, legislation which limits the ability of credit unions to grow and diversify will likely raise the operating costs of this important group of financial institutions. Additional structural tests of the most general translog specification suggest that none of the restrictive production conditions commonly imposed by other researchers using Cobb‐Douglas and CES specifications provide a valid representation of credit union technology. The results of many earlier studies are therefore open to question.

THE DIFFERENTIAL EFFECTS OF TIGHT MONEY: AN ECONOMETRIC STUDY

Published: 3/1970,  Volume: 25,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1970.tb00415.x  |  Cited by: 9

William L. Silber, Murray E. Polakoff