The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Public Thrift, Private Perks: Signaling Board Independence with Executive Pay
Published: 11/27/2020, Volume: 76, Issue: 2 | DOI: 10.1111/jofi.12989 | Cited by: 7
PABLO RUIZ‐VERDÚ, RAVI SINGH
We analyze how boards' reputational concerns influence executive compensation and the use of hidden pay. Independent boards reduce disclosed pay to signal their independence, but are more likely than manager‐friendly boards to use hidden pay or to distort incentive contracts. Stronger reputational pressures lead to lower disclosed pay, weaker managerial incentives, and higher hidden pay, whereas greater transparency of executive compensation has the opposite effects. Although reputational concerns can induce boards to choose compensation contracts more favorable to shareholders, we show that there is a threshold beyond which stronger reputational concerns harm shareholders. Similarly, excessive pay transparency can harm shareholders.
The Relation between Price and Performance in the Mutual Fund Industry
Published: 9/28/2009, Volume: 64, Issue: 5 | DOI: 10.1111/j.1540-6261.2009.01497.x | Cited by: 371
JAVIER GIL‐BAZO, PABLO RUIZ‐VERDÚ
Gruber (1996)
drew attention to the puzzle that investors buy actively managed equity mutual funds, even though on average such funds underperform index funds. We uncover another puzzling fact about the market for equity mutual funds: Funds with worse before‐fee performance charge higher fees. This negative relation between fees and performance is robust and can be explained as the outcome of strategic fee‐setting by mutual funds in the presence of investors with different degrees of sensitivity to performance. We also find some evidence that better fund governance may bring fees more in line with performance.
Liquidity as Social Expertise
Published: 3/31/2018, Volume: 73, Issue: 2 | DOI: 10.1111/jofi.12606 | Cited by: 24
PABLO KURLAT
This paper proposes a theory of liquidity dynamics. Illiquidity results from asymmetric information. Observing the historical track record teaches agents how to interpret public information and helps overcome information asymmetry. However, an illiquidity trap can arise: too much asymmetric information leads to the breakdown of trade, which interrupts learning and perpetuates illiquidity. Liquidity falls in response to unexpected events that lead agents to question their valuation models (especially in newer markets) may be slow to recover after a crisis, and is higher in periods of stability.
Stock Market Volatility and Learning
Published: 1/14/2016, Volume: 71, Issue: 1 | DOI: 10.1111/jofi.12364 | Cited by: 227
KLAUS ADAM, ALBERT MARCET, JUAN PABLO NICOLINI
We show that consumption‐based asset pricing models with time‐separable preferences generate realistic amounts of stock price volatility if one allows for small deviations from rational expectations. Rational investors with subjective beliefs about price behavior optimally learn from past price observations. This imparts momentum and mean reversion into stock prices. The model quantitatively accounts for the volatility of returns, the volatility and persistence of the price‐dividend ratio, and the predictability of long‐horizon returns. It passes a formal statistical test for the overall fit of a set of moments provided one excludes the equity premium.
The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach‐for‐Yield, and Real Effects
Published: 1/25/2019, Volume: 74, Issue: 1 | DOI: 10.1111/jofi.12735 | Cited by: 213
BERNARDO MORAIS, JOSÉ‐LUIS PEYDRÓ, JESSICA ROLDÁN‐PEÑA, CLAUDIA RUIZ‐ORTEGA
We identify the international credit channel by exploiting Mexican supervisory data sets and foreign monetary policy shocks in a country with a large presence of European and U.S. banks. A softening of foreign monetary policy expands credit supply of foreign banks (e.g., U.K. policy affects credit supply in Mexico via U.K. banks), inducing strong firm‐level real effects. Results support an international risk‐taking channel and spillovers of core countries’ monetary policies to emerging markets, both in the foreign monetary softening part (with higher credit and liquidity risk‐taking by foreign banks) and in the tightening part (with negative local firm‐level real effects).