Search results: 36.
Is a VC Partnership Greater Than the Sum of Its Partners?
Published: 5/11/2015, Volume: 70, Issue: 3 | DOI: 10.1111/jofi.12249 | Cited by: 149
MICHAEL EWENS, MATTHEW RHODES‐KROPF
This paper investigates whether individual venture capitalists have repeatable investment skill and the extent to which their skill is impacted by the venture capital (VC) firm where they work. We examine a unique data set that tracks the performance of individual venture capitalists' investments over time and as they move between firms. We find evidence of skill and exit style differences even among venture partners investing at the same VC firm at the same time. Furthermore, our estimates suggest the partners' human capital is two to five times more important than the VC firm's organizational capital in explaining performance.
Concentrating on Governance
Published: 9/21/2011, Volume: 66, Issue: 5 | DOI: 10.1111/j.1540-6261.2011.01684.x | Cited by: 70
DALIDA KADYRZHANOVA, MATTHEW RHODES‐KROPF
This paper develops a novel trade‐off view of corporate governance. Using a model that integrates agency costs and bargaining benefits of management‐friendly provisions, we identify the economic determinants of the resulting trade‐offs for shareholder value. Consistent with the theory, our empirical analysis shows that provisions that allow managers to delay takeovers have significant bargaining effects and a positive relation with shareholder value in concentrated industries. By contrast, non‐delay provisions have an unambiguously negative relation with value, particularly in concentrated industries. Our analysis suggests that there are governance trade‐offs for shareholders and that industry concentration is an important determinant of their severity.
Market Valuation and Merger Waves
Published: 12/2004, Volume: 59, Issue: 6 | DOI: 10.1111/j.1540-6261.2004.00713.x | Cited by: 712
MATTHEW RHODES‐KROPF, S. VISWANATHAN
Does valuation affect mergers? Data suggest that periods of stock merger activity are correlated with high market valuations. The naïve explanation that overvalued bidders wish to use stock is incomplete because targets should not be eager to accept stock. However, we show that potential market value deviations from fundamental values on both sides of the transaction can rationally lead to a correlation between stock merger activity and market valuation. Merger waves and waves of cash and stock purchases can be rationally driven by periods of over‐ and undervaluation of the stock market. Thus, valuation fundamentally impacts mergers.
Corporate Reorganizations and Non‐Cash Auctions
Published: 8/2000, Volume: 55, Issue: 4 | DOI: 10.1111/0022-1082.00269 | Cited by: 57
Matthew Rhodes‐Kropf, S. Viswanathan
This paper extends the theory of non‐cash auctions by considering the revenue and efficiency of using different securities. Research on bankruptcy and privatization suggests using non‐cash auctions to increase cash‐constrained bidder participation. We examine this proposal and demonstrate that securities may lead to higher revenue. However, bidders pool unless bids include debt, which results in possible repossession by the seller. This suggests all‐equity outcomes are unlikely and explains the high debt of reorganized firms. Securities also inefficiently determine bidders' incentive contracts and the firm's capital structure. Therefore, we recommend a new cash auction for an incentive contract.
The Market for Mergers and the Boundaries of the Firm
Published: 5/9/2008, Volume: 63, Issue: 3 | DOI: 10.1111/j.1540-6261.2008.01355.x | Cited by: 328
MATTHEW RHODES‐KROPF, DAVID T. ROBINSON
We relate the property rights theory of the firm to empirical regularities in the market for mergers and acquisitions. We first show that high market‐to‐book acquirers typically do not purchase low market‐to‐book targets. Instead, mergers pair together firms with similar ratios. We then build a continuous‐time model of investment and merger activity combining search, scarcity, and asset complementarity to explain this like buys like result. We test the model by relating like‐buys‐like to search frictions. Search frictions and assortative matching vary inversely, supporting the model over standard explanations.
Discussion
Published: 8/2001, Volume: 56, Issue: 4 | DOI: 10.1111/0022-1082.00372 | Cited by: 0
Matthew Richardson
Firing Costs and Capital Structure Decisions
Published: 9/14/2016, Volume: 71, Issue: 5 | DOI: 10.1111/jofi.12403 | Cited by: 601
MATTHEW SERFLING
I exploit the adoption of state‐level labor protection laws as an exogenous increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure decisions. I find that firms reduce debt ratios following the adoption of these laws, with this result stronger for firms that experience larger increases in firing costs. I also document that, following the adoption of these laws, a firm's degree of operating leverage rises, earnings variability increases, and employment becomes more rigid. Overall, these results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.
On Intraday Risk Premia
Published: 3/1995, Volume: 50, Issue: 1 | DOI: 10.1111/j.1540-6261.1995.tb05176.x | Cited by: 49
MATTHEW SPIEGEL, AVANIDHAR SUBRAHMANYAM
This article presents a framework for analyzing the dynamic effects of anticipated large demand pressures on asset risk premia. We show that large institutions who can time their entry into the market will trade either at the open, or during periods of unusual demand pressures. We show that if these institutions do enter later in the day, they trade in the same direction as institutions which provide liquidity continuously; institutions therefore appear to exhibit “herding” behavior. We also explore how changing the uncertainty of demand pressures late in the day affects trading costs throughout the day.
Dynamic Competition, Valuation, and Merger Activity
Published: 1/11/2013, Volume: 68, Issue: 1 | DOI: 10.1111/j.1540-6261.2012.01796.x | Cited by: 39
MATTHEW SPIEGEL, HEATHER TOOKES
We model the interactions between product market competition and investment valuation within a dynamic oligopoly. To our knowledge, the model is the first continuous‐time corporate finance model in a multiple firm setting with heterogeneous products. The model is tractable and amenable to estimation. We use it to relate current industry characteristics with firm value and financial decisions. Unlike most corporate finance models, it produces predictions regarding parameter magnitudes as well their signs. Estimates of the model's parameters indicate strong linkages between model‐implied and actual values. The paper uses the estimated parameters to predict rivals’ returns near merger announcements.
DotCom Mania: The Rise and Fall of Internet Stock Prices
Published: 5/6/2003, Volume: 58, Issue: 3 | DOI: 10.1111/1540-6261.00560 | Cited by: 621
Eli Ofek, Matthew Richardson
AbstractThis paper explores a model based on agents with heterogenous beliefs facing short sales restrictions, and its explanation for the rise, persistence, and eventual fall of Internet stock prices. First, we document substantial short sale restrictions for Internet stocks. Second, using data on Internet holdings and block trades, we show a link between heterogeneity and price effects for Internet stocks. Third, arguing that lockup expirations are a loosening of the short sale constraint, we document average, long‐run excess returns as low as −33 percent for Internet stocks postlockup. We link the Internet bubble burst to the unprecedented level of lockup expirations and insider selling.
A Rational Expectations Model of Financial Contagion
Published: 4/2002, Volume: 57, Issue: 2 | DOI: 10.1111/1540-6261.00441 | Cited by: 737
Laura E. Kodres, Matthew Pritsker
We develop a multiple asset rational expectations model of asset prices to explain financial market contagion. Although the model allows contagion through several channels, our focus is on contagion through cross‐market rebalancing. Through this channel, investors transmit idiosyncratic shocks from one market to others by adjusting their portfolios' exposures to shared macroeconomic risks. The pattern and severity of financial contagion depends on markets' sensitivities to shared macroeconomic risk factors, and on the amount of information asymmetry in each market. The model can generate contagion in the absence of news, as well as between markets that do not directly share macroeconomic risks.
The Takeover Deterrent Effect of Open Market Share Repurchases
Published: 8/2007, Volume: 62, Issue: 4 | DOI: 10.1111/j.1540-6261.2007.01258.x | Cited by: 204
MATTHEW T. BILLETT, HUI XUE
This paper examines whether open market share repurchases deter takeovers. We model pre‐repurchase takeover probability as a latent variable and examine its impact on the firm's decision to repurchase shares. Given specification tests reject the Tobit model, we turn to the censored quantile regression method of Powell (1986, Journal of Econometrics 32, 143–155). We find a significantly positive relation between open market share repurchases and takeover probability, and we reconcile empirical findings in previous studies that contradict predictions. Repurchase activity is inversely related to firm size, consistent with smaller firms having greater information asymmetry, and is related to temporary, but not permanent, cash flows.
Stealing Deposits: Deposit Insurance, Risk‐Taking, and the Removal of Market Discipline in Early 20th‐Century Banks
Published: 2/12/2019, Volume: 74, Issue: 2 | DOI: 10.1111/jofi.12753 | Cited by: 112
CHARLES W. CALOMIRIS, MATTHEW JAREMSKI
Deposit insurance reduces liquidity risk but can increase insolvency risk by encouraging reckless behavior. Several U.S. states installed deposit insurance laws before the creation of the Federal Deposit Insurance Corporation, and those laws applied only to some depository institutions within those states. These experiments present a unique testing ground for investigating the effect of deposit insurance. We show that deposit insurance removed market discipline constraining uninsured banks. Taking advantage of World War I's rise in world agricultural prices, insured banks increased their insolvency risk and competed aggressively for deposits. When prices fell after the war, the insurance systems collapsed and suffered high losses.
The Impact of Supervision on Bank Performance
Published: 7/29/2020, Volume: 75, Issue: 5 | DOI: 10.1111/jofi.12964 | Cited by: 194
BEVERLY HIRTLE, ANNA KOVNER, MATTHEW PLOSSER
We explore the impact of supervision on the riskiness, profitability, and growth of U.S. banks. Using data on supervisors' time use, we demonstrate that the top‐ranked banks by size within a supervisory district receive more attention from supervisors, even after controlling for size, complexity, risk, and other characteristics. Using a matched sample approach, we find that these top‐ranked banks that receive more supervisory attention hold less risky loan portfolios, are less volatile, and are less sensitive to industry downturns, but do not have lower growth or profitability. Our results underscore the distinct role of supervision in mitigating banking sector risk.
Using Generalized Method of Moments to Test Mean‐Variance Efficiency
Published: 6/1991, Volume: 46, Issue: 2 | DOI: 10.1111/j.1540-6261.1991.tb02672.x | Cited by: 153
A. CRAIG MACKINLAY, MATTHEW P. RICHARDSON
This paper develops tests of unconditional mean‐variance efflciency under weak distributional assumptions using a Generalized Method of Moments framework. These tests are potentially more robust than commonly employed tests which rely on the assumption that asset returns are normally distributed and temporarily i.i.d. Using returns for size‐based portfolios from 1926 to 1988 we show that the conclusion concerning the mean‐variance effilciency of market indexes can be sensitive to the test considered.
Financial Markets Where Traders Neglect the Informational Content of Prices
Published: 10/29/2018, Volume: 74, Issue: 1 | DOI: 10.1111/jofi.12729 | Cited by: 124
ERIK EYSTER, MATTHEW RABIN, DIMITRI VAYANOS
We model a financial market where some traders of a risky asset do not fully appreciate what prices convey about others' private information. Markets comprising solely such “cursed” traders generate more trade than those comprising solely rationals. Because rationals arbitrage away distortions caused by cursed traders, mixed markets can generate even more trade. Per‐trader volume in cursed markets increases with market size; volume may instead disappear when traders infer others' information from prices, even when they dismiss it as noisier than their own. Making private information public raises rational and “dismissive” volume, but reduces cursed volume given moderate noninformational trading motives.
Buyout Activity: The Impact of Aggregate Discount Rates
Published: 1/12/2017, Volume: 72, Issue: 1 | DOI: 10.1111/jofi.12464 | Cited by: 44
VALENTIN HADDAD, ERIK LOUALICHE, MATTHEW PLOSSER
Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is the primary determinant of buyout activity rather than credit‐specific conditions. We articulate a simple explanation for this phenomenon: a low risk premium increases the present value of performance gains and decreases the cost of holding an illiquid investment. A panel of U.S. buyouts confirms this view. The risk premium shapes changes in buyout characteristics over the cycle, including their riskiness, leverage, and performance. Our results underscore the importance of the risk premium in corporate finance decisions.
Does Floor Trading Matter?
Published: 10/27/2024, Volume: 80, Issue: 1 | DOI: 10.1111/jofi.13401 | Cited by: 18
JONATHAN BROGAARD, MATTHEW C. RINGGENBERG, DOMINIK ROESCH
Although algorithmic trading now dominates financial markets, some exchanges continue to use human floor traders. On March 23, 2020 the NYSE suspended floor trading because of COVID‐19. Using a difference‐in‐differences analysis around the closure of the floor, we find that floor traders are important contributors to market quality. The suspension of floor trading leads to higher spreads and larger pricing errors for treated stocks relative to control stocks. To explore the mechanism, we exploit two partial floor reopenings that have different characteristics. Our finding suggests that in‐person human interaction facilitates the transfer of valuable information that algorithms lack.
Industry Returns and the Fisher Effect
Published: 12/1994, Volume: 49, Issue: 5 | DOI: 10.1111/j.1540-6261.1994.tb04774.x | Cited by: 155
JACOB BOUDOUKH, MATTHEW RICHARDSON, ROBERT F. WHITELAW
We investigate the cross‐sectional relation between industry‐sorted stock returns and expected inflation, and we find that this relation is linked to cyclical movements in industry output. Stock returns of noncyclical industries tend to covary positively with expected inflation, while the reverse holds for cyclical industries. From a theoretical perspective, we describe a model that captures both (i) the cross‐sectional variation in these relations across industries, and (ii) the negative and positive relation between stock returns and inflation at short and long horizons, respectively. The model is developed in an economic environment in which the spirit of the Fisher model is preserved.
An Unbiased Reexamination of Stock Market Volatility
Published: 7/1985, Volume: 40, Issue: 3 | DOI: 10.1111/j.1540-6261.1985.tb04990.x | Cited by: 128
N. GREGORY MANKIW, DAVID ROMER, MATTHEW D. SHAPIRO
Recent work demonstrates serious statistical problems with standard volatility tests. This paper proposes new tests that are unbiased in small samples and that do not require assumptions of stationarity. The new tests continue to find evidence against the model positing rational expectations and a constant required rate of return on equity.
Thirty Years of Change: The Evolution of Classified Boards
Published: 8/22/2025, Volume: 80, Issue: 5 | DOI: 10.1111/jofi.13485 | Cited by: 17
SCOTT GUERNSEY, FENG GUO, TINGTING LIU, MATTHEW SERFLING
Based on a comprehensive data set of classified (staggered) boards covering nearly all U.S. public firms from 1991 to 2020, we show that contrary to conventional wisdom, the use of classified boards remains widespread. Moreover, classified board usage over a firm's life cycle depends significantly on the decade the firm matured or year it went public. While classified boards were rarely removed in the 1990s, firms became more likely to declassify as they matured during the following decades. Decreased collective action costs and increased innovation‐related investments, institutional ownership, and scrutiny of governance contributed to this more dynamic adjustment.
On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing
Published: 3/20/2007, Volume: 62, Issue: 2 | DOI: 10.1111/j.1540-6261.2007.01226.x | Cited by: 494
JACOB BOUDOUKH, RONI MICHAELY, MATTHEW RICHARDSON, MICHAEL R. ROBERTS
We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus repurchases minus issuances) yields are used instead of the dividend yield. Similarly, we find that payout (net payout) yields contains information about the cross section of expected stock returns exceeding that of dividend yields, and that the high minus low payout yield portfolio is a priced factor.
A Multiple Lender Approach to Understanding Supply and Search in the Equity Lending Market
Published: 3/7/2013, Volume: 68, Issue: 2 | DOI: 10.1111/jofi.12007 | Cited by: 176
ADAM C. KOLASINSKI, ADAM V. REED, MATTHEW C. RINGGENBERG
Using unique data from 12 lenders, we examine how equity lending fees respond to demand shocks. We find that, when demand is moderate, fees are largely insensitive to demand shocks. However, at high demand levels, further increases in demand lead to significantly higher fees and the extent to which demand shocks impact fees is also related to search frictions in the loan market. Moreover, consistent with search models, we find significant dispersion in loan fees, with this dispersion increasing in loan scarcity and search frictions. Our findings imply that search frictions significantly impact short selling costs.
Short‐Selling Risk
Published: 2/13/2018, Volume: 73, Issue: 2 | DOI: 10.1111/jofi.12601 | Cited by: 227
JOSEPH E. ENGELBERG, ADAM V. REED, MATTHEW C. RINGGENBERG
Short sellers face unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that short‐selling risk affects prices among the cross‐section of stocks. Stocks with more short‐selling risk have lower returns, less price efficiency, and less short selling.
Weathering Cash Flow Shocks
Published: 5/10/2021, Volume: 76, Issue: 4 | DOI: 10.1111/jofi.13024 | Cited by: 278
JAMES R. BROWN, MATTHEW T. GUSTAFSON, IVAN T. IVANOV
Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank‐borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower‐friendly loan provisions. Credit line adjustments occur within one calendar quarter of the shock and persist for at least nine months. Overall, we provide evidence that bank credit lines are an important tool for managing the nonfundamental component of cash flow volatility, especially for solvent, small bank borrowers.
The Effect of Lender Identity on a Borrowing Firm's Equity Return
Published: 6/1995, Volume: 50, Issue: 2 | DOI: 10.1111/j.1540-6261.1995.tb04801.x | Cited by: 330
MATTHEW T. BILLETT, MARK J. FLANNERY, JON A. GARFINKEL
Previous research demonstrates that a firm's common stock price tends to fall when it issues new public securities. By contrast, commercial bank loans elicit significantly positive borrower returns. This article investigates whether the lender's identity influences the market's reaction to a loan announcement. Although we find no significant difference between the market's response to bank and nonbank loans, we do find that lenders with a higher credit rating are associated with larger abnormal borrower returns. This evidence complements earlier findings that an auditor's or investment banker's perceived “quality” signals valuable information about firm value to uninformed market investors.
Ex Ante Bond Returns and the Liquidity Preference Hypothesis
Published: 6/1999, Volume: 54, Issue: 3 | DOI: 10.1111/0022-1082.00140 | Cited by: 33
Jacob Boudoukh, Matthew Richardson, Tom Smith, Robert F. Whitelaw
We provide a formal test of the liquidity preference hypothesis (LPH), that is, the monotonicity of ex ante term premiums, using nonparametric estimates that do not require a structural model for conditional expected returns. Although the point estimates of the term premiums are consistent with previous conclusions in the literature regarding violations of the LPH, the test statistics are generally insignificant, even when powerful conditioning information is used. These results illustrate the importance of correctly accounting for correlations across maturities and of formally testing the inequality restrictions implied by the LPH.
Import Competition and Household Debt
Published: 10/25/2022, Volume: 77, Issue: 6 | DOI: 10.1111/jofi.13185 | Cited by: 28
JEAN‐NOËL BARROT, ERIK LOUALICHE, MATTHEW PLOSSER, JULIEN SAUVAGNAT
We analyze the effect of import competition on household balance sheets using individual data on consumer finances. We exploit variation in local industry exposure to foreign competition to study households' response to the income shock triggered by China's accession to the World Trade Organization. We show that household debt increases significantly in regions where manufacturing industries are more exposed to import competition. The effects are driven by home equity extraction and are concentrated in areas with strong house price growth. Our results highlight the role played by mortgage markets in absorbing displacement shocks triggered by globalization.
Reusing Natural Experiments
Published: 6/7/2023, Volume: 78, Issue: 4 | DOI: 10.1111/jofi.13250 | Cited by: 116
DAVIDSON HEATH, MATTHEW C. RINGGENBERG, MEHRDAD SAMADI, INGRID M. WERNER
After a natural experiment is first used, other researchers often reuse the setting, examining different outcome variables. We use simulations based on real data to illustrate the multiple hypothesis testing problem that arises when researchers reuse natural experiments. We then provide guidance for future inference based on popular empirical settings including difference‐in‐differences, instrumental variables, and regression discontinuity designs. When we apply our guidance to two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we find that many results that were statistically significant using single hypothesis testing do not survive corrections for multiple hypothesis testing.
The Portfolio‐Driven Disposition Effect
Published: 8/21/2024, Volume: 79, Issue: 5 | DOI: 10.1111/jofi.13378 | Cited by: 37
LI AN, JOSEPH ENGELBERG, MATTHEW HENRIKSSON, BAOLIAN WANG, JARED WILLIAMS
The disposition effect for a stock significantly weakens if the portfolio is at a gain, but is large when it is at a loss. We find this portfolio‐driven disposition effect (PDDE) in four independent settings: U.S. and Chinese archival data, as well as U.S. and Chinese experiments. The PDDE is robust to a variety of controls in regression specifications and is not explained by extreme returns, portfolio rebalancing, tax considerations, or investor heterogeneity. Our evidence suggests that investors form mental frames at both the stock and the portfolio levels and that these frames combine to generate the PDDE.
Bondholder Wealth Effects in Mergers and Acquisitions: New Evidence from the 1980s and 1990s
Published: 2/2004, Volume: 59, Issue: 1 | DOI: 10.1111/j.1540-6261.2004.00628.x | Cited by: 270
Matthew T. Billett, Tao‐Hsien Dolly King, David C. Mauer
We examine the wealth effects of mergers and acquisitions on target and acquiring firm bondholders in the 1980s and 1990s. Consistent with a coinsurance effect, below investment grade target bonds earn significantly positive announcement period returns. By contrast, acquiring firm bonds earn negative announcement period returns. Additionally, target bonds have significantly larger returns when the target's rating is below the acquirer's, when the combination is anticipated to decrease target risk or leverage, and when the target's maturity is shorter than the acquirer's. Finally, we find that target and acquirer announcement period bond returns are significantly larger in the 1990s.
Optimal Risk Management Using Options
Published: 2/1999, Volume: 54, Issue: 1 | DOI: 10.1111/0022-1082.00108 | Cited by: 88
Dong‐Hyun Ahn, Jacob Boudoukh, Matthew Richardson, Robert F. Whitelaw
This article provides an analytical solution to the problem of an institution optimally managing the market risk of a given exposure by minimizing its Value‐at‐Risk using options. The optimal hedge consists of a position in a single option whose strike price is independent of the level of expense the institution is willing to incur for its hedging program. This optimal strike price depends on the distribution of the asset exposure, the horizon of the hedge, and the level of protection desired by the institution. Moreover, the costs associated with a suboptimal choice of exercise price are economically significant.
Growth Opportunities and the Choice of Leverage, Debt Maturity, and Covenants
Published: 3/20/2007, Volume: 62, Issue: 2 | DOI: 10.1111/j.1540-6261.2007.01221.x | Cited by: 628
MATTHEW T. BILLETT, TAO‐HSIEN DOLLY KING, DAVID C. MAUER
We investigate the effect of growth opportunities in a firm's investment opportunity set on its joint choice of leverage, debt maturity, and covenants. Using a database that contains detailed debt covenant information, we provide large‐sample evidence of the incidence of covenants in public debt and construct firm‐level indices of bondholder covenant protection. We find that covenant protection is increasing in growth opportunities, debt maturity, and leverage. We also document that the negative relation between leverage and growth opportunities is significantly attenuated by covenant protection, suggesting that covenants can mitigate the agency costs of debt for high growth firms.
Sending Out an SMS: Automatic Enrollment Experiments for Overdraft Alerts
Published: 12/26/2024, Volume: 80, Issue: 1 | DOI: 10.1111/jofi.13404 | Cited by: 4
MICHAEL D. GRUBB, DARRAGH KELLY, JEROEN NIEBOER, MATTHEW OSBORNE, JONATHAN SHAW
At‐scale field experiments at major U.K. banks show that automatic enrollment into “just‐in‐time” text alerts reduces unarranged overdraft and unpaid item charges 17% to 19% and arranged overdraft charges 4% to 8%, implying annual market‐wide savings of £170 million to £240 million. Incremental benefits from “early‐warning” alerts are statistically insignificant, although economically significant effects are not ruled out. Prior to the experiments, over half of overdrafts could have been avoided by using lower‐cost liquidity available in savings and credit card accounts. Alerts help consumers achieve less than half of these potential savings.
Anomaly Time
Published: 7/18/2024, Volume: 79, Issue: 5 | DOI: 10.1111/jofi.13372 | Cited by: 21
BOONE BOWLES, ADAM V. REED, MATTHEW C. RINGGENBERG, JACOB R. THORNOCK
We examine the timing of returns around the publication of anomaly trading signals. Using a database that captures when information is first publicly released, we show that anomaly returns are concentrated in the first month after information release dates, and these returns decay soon thereafter. We also show that the academic convention of forming portfolios in June underestimates predictability because it uses stale information, which makes some anomalies appear insignificant. In contrast, we show many anomalies do predict returns if portfolios are formed immediately after information releases. Finally, we develop guidance on forming portfolios without using stale information.
Investor Tax Credits and Entrepreneurship: Evidence from U.S. States
Published: 8/15/2023, Volume: 78, Issue: 5 | DOI: 10.1111/jofi.13267 | Cited by: 75
MATTHEW DENES, SABRINA T. HOWELL, FILIPPO MEZZANOTTI, XINXIN WANG, TING XU
Angel investor tax credits are used globally to spur high‐growth entrepreneurship. Exploiting their staggered implementation in 31 U.S. states, we find that they increase angel investment yet have no significant impact on entrepreneurial activity. Two mechanisms explain these results: crowding out of alternative financing and low sensitivity of professional investors to tax credits. With a large‐scale survey and a stylized model, we show that low responsiveness among professional angels may reflect the fat‐tailed return distributions that characterize high‐growth startups. The results contrast with evidence that direct subsidies to firms have positive effects, raising concerns about promoting entrepreneurship with investor subsidies.