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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Agency Conflicts, Investment, and Asset Pricing: Erratum
Published: 9/3/2015, Volume: 70, Issue: 5 | DOI: 10.1111/jofi.12307 | Cited by: 2
RUI ALBUQUERUE, NENG WANG
Agency Conflicts, Investment, and Asset Pricing
Published: 1/10/2008, Volume: 63, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01309.x | Cited by: 191
RUI ALBUQUERUE, NENG WANG
The separation of ownership and control allows controlling shareholders to pursue private benefits. We develop an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's q, higher return volatility, larger risk premia, and higher interest rate. Calibrating the model to the Korean economy reveals that perfecting investor protection increases the stock market's value by 22%, a gain for which outside shareholders are willing to pay 11% of their capital stock.
The Value of Control and the Costs of Illiquidity: Erratum
Published: 11/12/2015, Volume: 70, Issue: 6 | DOI: 10.1111/jofi.12359 | Cited by: 0
RUI ALBUQUERQUE, ENRIQUE SCHROTH
The Value of Control and the Costs of Illiquidity
Published: 7/23/2015, Volume: 70, Issue: 4 | DOI: 10.1111/jofi.12207 | Cited by: 48
RUI ALBUQUERQUE, ENRIQUE SCHROTH
We develop a search model of block trades that values the illiquidity of controlling stakes. The model considers several dimensions of illiquidity. First, following a liquidity shock, the controlling blockholder is forced to sell, possibly to a less efficient acquirer. Second, this sale may occur at a fire sale price. Third, absent a liquidity shock, a trade occurs only if a potential buyer arrives. Using a structural estimation approach and U.S. data on trades of controlling blocks of public corporations, we estimate the value of control, blockholders' marketability discount, and dispersed shareholders' illiquidity‐spillover discount.
A Unified Model of Firm Dynamics with Limited Commitment and Assortative Matching
Published: 10/19/2020, Volume: 76, Issue: 1 | DOI: 10.1111/jofi.12980 | Cited by: 19
HENGJIE AI, DANA KIKU, RUI LI, JINCHENG TONG
We develop a unified theory of dynamic contracting and assortative matching to explain firm dynamics. In our model, neither firms nor managers can commit to arrangements that yield lower payoffs than their outside options, which are microfounded by the equilibrium conditions in a matching market. The model endogenously generates power laws in firm size and CEO compensation, and explains differences in their right tails. We also show that our model quantitatively accounts for many salient features of the time‐series dynamics and the cross‐sectional distribution of firm investment, dividend payout, and CEO compensation.
Marketwide Private Information in Stocks: Forecasting Currency Returns
Published: 9/10/2008, Volume: 63, Issue: 5 | DOI: 10.1111/j.1540-6261.2008.01398.x | Cited by: 50
RUI ALBUQUERQUE, EVA DE FRANCISCO, LUIS B. MARQUES
We present a model of equity trading with informed and uninformed investors where informed investors trade on firm‐specific and marketwide private information. The model is used to identify the component of order flow due to marketwide private information. Estimated trades driven by marketwide private information display little or no correlation with the first principal component in order flow. Indeed, we find that co‐movement in order flow captures variation mostly in liquidity trades. Marketwide private information obtained from equity market data forecasts industry stock returns, and also currency returns.
Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses
Published: 11/7/2003, Volume: 58, Issue: 6 | DOI: 10.1046/j.1540-6261.2003.00613.x | Cited by: 387
Warren Bailey, Haitao Li, Connie X. Mao, Rui Zhong
AbstractWith the adoption of Regulation Fair Disclosure (Reg FD), market behavior around earnings releases displays no significant change in return volatility (after controlling for decimalization of stock trading) but significant increases in trading volume due to difference in opinion. Analyst forecast dispersion increases, and increases in other measures of disagreement and difference of opinion suggest greater difficulty in forming forecasts beyond the current quarter. Corporations increase the quantity of voluntary disclosures, but only for current quarter earnings. Thus, Reg FD seems to increase the quantity of information available to the public while imposing greater demands on investment professionals.
Valuation Risk and Asset Pricing
Published: 11/10/2016, Volume: 71, Issue: 6 | DOI: 10.1111/jofi.12437 | Cited by: 142
RUI ALBUQUERQUE, MARTIN EICHENBAUM, VICTOR XI LUO, SERGIO REBELO
Standard representative‐agent models fail to account for the weak correlation between stock returns and measurable fundamentals, such as consumption and output growth. This failing, which underlies virtually all modern asset pricing puzzles, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account for key asset pricing moments, such as the equity premium, the bond term premium, and the weak correlation between stock returns and fundamentals.
Do Physiological and Spiritual Factors Affect Economic Decisions?
Published: 5/14/2021, Volume: 76, Issue: 5 | DOI: 10.1111/jofi.13032 | Cited by: 25
CEM DEMIROGLU, OGUZHAN OZBAS, RUI C. SILVA, MEHMET FATİH ULU
We examine the effects of physiology and spiritual sentiment on economic decision‐making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads.
Talent in Distressed Firms: Investigating the Labor Costs of Financial Distress
Published: 10/18/2021, Volume: 76, Issue: 6 | DOI: 10.1111/jofi.13077 | Cited by: 132
RAMIN P. BAGHAI, RUI C. SILVA, VIKTOR THELL, VIKRANT VIG
The importance of skilled labor and the inalienability of human capital expose firms to the risk of losing talent at critical times. Using Swedish microdata, we document that firms lose workers with the highest cognitive and noncognitive skills as they approach bankruptcy. In a quasi‐experiment, we confirm that financial distress drives these results: following a negative export shock caused by exogenous currency movements, talent abandons the firm, but only if the exporter is highly leveraged. Consistent with talent dependence being associated with higher labor costs of financial distress, firms that rely more on talent have more conservative capital structures.