The Journal of Finance

Do Creditor Rights Increase Employment Risk? Evidence from Loan Covenants

Published: 11/10/2016,  Volume: 71,  Issue: 6  |  DOI: 10.1111/jofi.12435  |  Cited by: 256

ANTONIO FALATO, NELLIE LIANG

Using a regression discontinuity design, we provide evidence that there are sharp and substantial employment cuts following loan covenant violations, when creditors gain rights to accelerate, restructure, or terminate a loan. The cuts are larger at firms with higher financing frictions and with weaker employee bargaining power, and during industry and macroeconomic downturns, when employees have fewer job opportunities. Union elections that create new labor bargaining units lead to higher loan spreads, consistent with creditors requiring compensation when employees gain bargaining power. Overall, binding financial contracts have a large impact on employees and are an amplification mechanism of economic downturns.

The Evolution of a Financial Crisis: Collapse of the Asset‐Backed Commercial Paper Market

Published: 5/20/2013,  Volume: 68,  Issue: 3  |  DOI: 10.1111/jofi.12023  |  Cited by: 302

DANIEL COVITZ, NELLIE LIANG, GUSTAVO A. SUAREZ

This paper documents “runs” on asset‐backed commercial paper (ABCP) programs in 2007. We find that one‐third of programs experienced a run within weeks of the onset of the ABCP crisis and that runs, as well as yields and maturities for new issues, were related to program‐level and macro‐financial risks. These findings are consistent with the asymmetric information framework used to explain banking panics, have implications for commercial paper investors’ degree of risk intolerance, and inform empirical predictions of recent papers on dynamic coordination failures.

Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut

Published: 8/2007,  Volume: 62,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2007.01261.x  |  Cited by: 217

JEFFREY R. BROWN, NELLIE LIANG, SCOTT WEISBENNER

We test whether executive stock ownership affects firm payouts using the 2003 dividend tax cut to identify an exogenous change in the after‐tax value of dividends. We find that executives with higher ownership were more likely to increase dividends after the tax cut in 2003, whereas no relation is found in periods when the dividend tax rate was higher. Relative to previous years, firms that initiated dividends in 2003 were more likely to reduce repurchases. The stock price reaction to the tax cut suggests that the substitution of dividends for repurchases may have been anticipated, consistent with agency conflicts.

A STUDY IN THE MATURITY STRUCTURE OF INTEREST RATES*

Published: 3/1966,  Volume: 21,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1966.tb02966.x  |  Cited by: 0

Liang‐Shing Fan

On the Foundations of Corporate Social Responsibility

Published: 3/21/2017,  Volume: 72,  Issue: 2  |  DOI: 10.1111/jofi.12487  |  Cited by: 1349

HAO LIANG, LUC RENNEBOOG

Using corporate social responsibility (CSR) ratings for 23,000 companies from 114 countries, we find that a firm's CSR rating and its country's legal origin are strongly correlated. Legal origin is a stronger explanation than “doing good by doing well” factors or firm and country characteristics (ownership concentration, political institutions, and globalization): firms from common law countries have lower CSR than companies from civil law countries, with Scandinavian civil law firms having the highest CSR ratings. Evidence from quasi‐natural experiments such as scandals and natural disasters suggests that civil law firms are more responsive to CSR shocks than common law firms.

The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies

Published: 5/29/2020,  Volume: 75,  Issue: 5  |  DOI: 10.1111/jofi.12947  |  Cited by: 151

YONGQIANG CHU, DAVID HIRSHLEIFER, LIANG MA

We examine the causal effect of limits to arbitrage on 11 well‐known asset pricing anomalies using the pilot program of Regulation SHO, which relaxed short‐sale constraints for a quasi‐random set of pilot stocks, as a natural experiment. We find that the anomalies became weaker on portfolios constructed with pilot stocks during the pilot period. The pilot program reduced the combined anomaly long–short portfolio returns by 72 basis points per month, a difference that survives risk adjustment with standard factor models. The effect comes only from the short legs of the anomaly portfolios.

Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration

Published: 11/11/2008,  Volume: 63,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2008.01413.x  |  Cited by: 187

STEPHEN BROWN, WILLIAM GOETZMANN, BING LIANG, CHRISTOPHER SCHWARZ

Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow‐performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.