Search results: 50.
The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives
Published: 3/21/2011, Volume: 66, Issue: 2 | DOI: 10.1111/j.1540-6261.2010.01641.x | Cited by: 256
JOHN AMERIKS, ANDREW CAPLIN, STEVEN LAUFER, STIJN VAN NIEUWERBURGH
The “annuity puzzle,” conveying the apparently low interest of retirees in longevity insurance, is central to household finance. Two possible explanations are “public care aversion” (PCA), retiree aversion to simultaneously running out of wealth and being in need of long‐term care, and an intentional bequest motive. To disentangle the relative importance of PCA and bequest motive, we estimate a structural model of the retirement phase using a novel survey instrument that includes hypothetical questions. We identify PCA as very significant and find bequest motives that spread deep into the middle class. Our results highlight potential interest in annuities that make allowance for long‐term care expenses.
THE PRICE ADJUSTMENT PROCESS OF BONDS TO RATING RECLASSIFICATIONS: A TEST OF BOND MARKET EFFICIENCY
Published: 5/1974, Volume: 29, Issue: 2 | DOI: 10.1111/j.1540-6261.1974.tb03069.x | Cited by: 53
Steven Katz
TREASURY BILL AUCTION PROCEDURES: AN EMPIRICAL INVESTIGATION
Published: 6/1973, Volume: 28, Issue: 3 | DOI: 10.1111/j.1540-6261.1973.tb01380.x | Cited by: 3
Steven Bolten
Real and Nominal Efficient Sets
Published: 3/1979, Volume: 34, Issue: 1 | DOI: 10.1111/j.1540-6261.1979.tb02073.x | Cited by: 10
STEVEN MANASTER
DISCUSSION
Published: 5/1980, Volume: 35, Issue: 2 | DOI: 10.1111/j.1540-6261.1980.tb02158.x | Cited by: 2
STEVEN MANASTER
REPLY
Published: 6/1975, Volume: 30, Issue: 3 | DOI: 10.1111/j.1540-6261.1975.tb01865.x | Cited by: 0
Steven Bolten
Management Buyouts: Evidence on Taxes as a Source of Value
Published: 7/1989, Volume: 44, Issue: 3 | DOI: 10.1111/j.1540-6261.1989.tb04381.x | Cited by: 248
STEVEN KAPLAN
This paper estimates the value of tax benefits in 76 management buyouts of public companies completed in the period 1980 to 1986. The median value of tax benefits, estimated at the time the buyout company goes private, has a lower bound of 21% and an upper bound of 143% of the premium paid to pre‐buyout shareholders. The estimated value depends on the rate buyout debt is repaid and the tax rate applied to the interest deductions. The paper also presents evidence on the actual taxes paid and debt repayment rates by these companies after the buyout. The results in this paper suggest that tax benefits are an important source of the wealth gains in management buyouts.
The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets
Published: 12/1996, Volume: 51, Issue: 5 | DOI: 10.1111/j.1540-6261.1996.tb05221.x | Cited by: 447
STEVEN R. GRENADIER
This article develops an equilibrium framework for strategic option exercise games. I focus on a particular example: the timing of real estate development. An analysis of the equilibrium exercise policies of developers provides insights into the forces that shape market behavior. The model isolates the factors that make some markets prone to bursts of concentrated development. The model also provides an explanation for why some markets may experience building booms in the face of declining demand and property values. While such behavior is often regarded as irrational overbuilding, the model provides a rational foundation for such exercise patterns.
Invisible Parameters in Option Prices
Published: 7/1993, Volume: 48, Issue: 3 | DOI: 10.1111/j.1540-6261.1993.tb04025.x | Cited by: 64
STEVEN L. HESTON
This paper characterizes contingent claim formulas that are independent of parameters governing the probability distribution of asset returns. While these parameters may affect stock, bond, and option values, they are “invisible” because they do not appear in the option formulas. For example, the Black‐Scholes (1973) formula is independent of the mean of the stock return. This paper presents a new formula based on the log‐negative‐binomial distribution. In analogy with Cox, Ross, and Rubinstein's (1979) log‐binomial formula, the log‐negative‐binomial option price does not depend on the jump probability. This paper also presents a new formula based on the log‐gamma distribution. In this formula, the option price does not depend on the scale of the stock return, but does depend on the mean of the stock return. This paper extends the log‐gamma formula to continuous time by defining a gamma process. The gamma process is a jump process with independent increments that generalizes the Wiener process. Unlike the Poisson process, the gamma process can instantaneously jump to a continuum of values. Hence, it is fundamentally “unhedgeable.” If the gamma process jumps upward, then stock returns are positively skewed, and if the gamma process jumps downward, then stock returns are negatively skewed. The gamma process has one more parameter than a Wiener process; this parameter controls the jump intensity and skewness of the process. The skewness of the log‐gamma process generates strike biases in options. In contrast to the results of diffusion models, these biases increase for short maturity options. Thus, the log‐gamma model produces a parsimonious option‐pricing formula that is consistent with empirical biases in the Black‐Scholes formula.
ESTIMATING TERM STRUCTURE EQUATIONS WITH INDIVIDUAL BOND DATA
Published: 3/1978, Volume: 33, Issue: 1 | DOI: 10.1111/j.1540-6261.1978.tb03390.x | Cited by: 4
Steven W. Dobson
Information Asymmetries and Security Market Design: An Empirical Study of the Secondary Market for U.S. Government Securities
Published: 7/1991, Volume: 46, Issue: 3 | DOI: 10.1111/j.1540-6261.1991.tb03772.x | Cited by: 5
STEVEN R. UMLAUF
This paper examines the empirical implications of an information asymmetry between primary and secondary dealers in the U.S. Government Securities market. This asymmetry arises because primary dealers are permitted to trade through all brokers operating in the marketplace while secondary dealers are restricted to trade through only a subset of brokers. Brokers distribute valuable information over video screens to their trading clients including dealers' up‐to‐date bid‐ask spreads and recent transaction prices. As such, all brokers' video screen information is available to primary dealers, while only a subset of brokers' information is available to secondary dealers. Empirical analyses detect the resulting information asymmetry.
RISING INTEREST RATES AND COST PUSH INFLATION
Published: 9/1974, Volume: 29, Issue: 4 | DOI: 10.1111/j.1540-6261.1974.tb03085.x | Cited by: 6
Steven A. Seelig
Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships
Published: 9/1990, Volume: 45, Issue: 4 | DOI: 10.1111/j.1540-6261.1990.tb02427.x | Cited by: 557
STEVEN A. SHARPE
Customer relationships arise between banks and firms because, in the process of lending, a bank learns more than others about its own customers. This information asymmetry allows lenders to capture some of the rents generated by their older customers; competition thus drives banks to lend to new firms at interest rates which initially generate expected losses. As a result, the allocation of capital is shifted toward lower quality and inexperienced firms. This inefficiency is eliminated if complete contingent contracts are written or, when this is costly, if banks can make nonbinding commitments that, in equilibrium, are backed by reputation.
THE STABILITY OF EXCHANGE RATE EXPECTATIONS AND CANADIAN CAPITAL FLOWS
Published: 12/1977, Volume: 32, Issue: 5 | DOI: 10.1111/j.1540-6261.1977.tb03361.x | Cited by: 1
Steven W. Kohlhagen
Initial Public Offer Underpricing: The Issuer's View—A Note
Published: 3/1987, Volume: 42, Issue: 1 | DOI: 10.1111/j.1540-6261.1987.tb02557.x | Cited by: 10
STEVEN M. DAWSON
AN INVESTIGATION INTO THE CHARACTERISTICS OF THE MUTUAL SAVINGS BANK RESIDENTIAL MORTGAGE*
Published: 3/1970, Volume: 25, Issue: 1 | DOI: 10.1111/j.1540-6261.1970.tb00425.x | Cited by: 0
Steven Edward Bolten
A NOTE ON FINANCIAL ANALYST EVALUATION
Published: 6/1973, Volume: 28, Issue: 3 | DOI: 10.1111/j.1540-6261.1973.tb01391.x | Cited by: 1
Frank Mastrapasqua, Steven Bolten
Are Stock Returns Predictable? A Test Using Markov Chains
Published: 3/1991, Volume: 46, Issue: 1 | DOI: 10.1111/j.1540-6261.1991.tb03751.x | Cited by: 81
GRANT MCQUEEN, STEVEN THORLEY
This paper uses a Markov chain model to test the random walk hypothesis of stock prices. Given a time series of returns, a Markov chain is defined by letting one state represent high returns and the other represent low returns. The random walk hypothesis restricts the transition probabilities of the Markov chain to be equal irrespective of the prior years. Annual real returns are shown to exhibit significant nonrandom walk behavior in the sense that low (high) returns tend to follow runs of high (low) returns in the postwar period.
Loan Commitment Contracts, Terms of Lending, and Credit Allocation
Published: 6/1986, Volume: 41, Issue: 2 | DOI: 10.1111/j.1540-6261.1986.tb05046.x | Cited by: 89
ARIE MELNIK, STEVEN PLAUT
This paper analyzes the structure of loan commitment contracts and the interrelationships among their component parameters. Lenders offer borrowers a set of loan “packages,” from which the latter may choose that “package” found to be most appealing. Borrowers may “trade off” changes in any loan parameter in exchange for other adjustments. The borrower, at this time, may “purchase” a larger credit ration for a price. Supporting empirical evidence is presented.
On the Benefits of Concurrent Lending and Underwriting
Published: 11/10/2005, Volume: 60, Issue: 6 | DOI: 10.1111/j.1540-6261.2005.00816.x | Cited by: 401
STEVEN DRUCKER, MANJU PURI
This paper examines whether there are efficiencies that benefit issuers and underwriters when a financial intermediary concurrently lends to an issuer while also underwriting its public securities offering. We find issuers, particularly noninvestment‐grade issuers for whom informational economies of scope are likely to be large, benefit through lower underwriter fees and discounted loan yield spreads. Underwriters, both commercial banks as well as investment banks, engage in concurrent lending and provide price discounts, albeit in different ways. We find concurrent lending helps underwriters build relationships, increasing the probability of receiving current and future business.
“Time for a Change”: Loan Conditions and Bank Behavior when Firms Switch Banks
Published: 9/21/2010, Volume: 65, Issue: 5 | DOI: 10.1111/j.1540-6261.2010.01596.x | Cited by: 306
VASSO IOANNIDOU, STEVEN ONGENA
This paper studies loan conditions when firms switch banks. Recent theoretical work on bank–firm relationships motivates our matching models. The dynamic cycle of the loan rate that we uncover is as follows: a loan granted by a new (outside) bank carries a loan rate that is significantly lower than the rates on comparable new loans from the firm's current (inside) banks. The new bank initially decreases the loan rate further but eventually ratchets it up sharply. Other loan conditions follow a similar economically relevant pattern. This bank strategy is consistent with the existence of hold‐up costs in bank–firm relationships.
The Calculation of Implied Variances from the Black‐Scholes Model: A Note
Published: 3/1982, Volume: 37, Issue: 1 | DOI: 10.1111/j.1540-6261.1982.tb01105.x | Cited by: 67
STEVEN MANASTER, GARY KOEHLER
Initial Public Offerings and Underwriter Reputation
Published: 9/1990, Volume: 45, Issue: 4 | DOI: 10.1111/j.1540-6261.1990.tb02426.x | Cited by: 1552
RICHARD CARTER, STEVEN MANASTER
This paper examined the returns earned by subscribing to initial public offerings of equity (IPOs).
Rock (1986)
suggests that IPO returns are required by uninformed investors as compensation for the risk of trading against superior information. We show that IPOs with more informed investor capital require higher returns. The marketing underwriter's reputation reveals the expected level of “informed” activity. Prestigious underwriters are associated with lower risk offerings. With less risk there is less incentive to acquire information and fewer informed investors. Consequently, prestigious underwriters are associated with IPOs that have lower returns.
Distance, Lending Relationships, and Competition
Published: 2/2005, Volume: 60, Issue: 1 | DOI: 10.1111/j.1540-6261.2005.00729.x | Cited by: 1162
HANS DEGRYSE, STEVEN ONGENA
We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe.
Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses
Published: 10/2004, Volume: 59, Issue: 5 | DOI: 10.1111/j.1540-6261.2004.00696.x | Cited by: 821
STEVEN N. KAPLAN, PER STRÖMBERG
We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs describe the strengths and risks of the investments as well as expected postinvestment actions. We classify the risks into three categories and relate them to the allocation of cash flow rights, contingencies, control rights, and liquidation rights between VCs and entrepreneurs. The risk results suggest that agency and hold‐up problems are important to contract design and monitoring, but that risk sharing is not. Greater VC control is associated with increased management intervention, while greater VC equity incentives are associated with increased value‐added support.
Private Equity Performance: Returns, Persistence, and Capital Flows
Published: 8/2005, Volume: 60, Issue: 4 | DOI: 10.1111/j.1540-6261.2005.00780.x | Cited by: 1406
STEVEN N. KAPLAN, ANTOINETTE SCHOAR
This paper investigates the performance and capital inflows of private equity partnerships. Average fund returns (net of fees) approximately equal the S&P 500 although substantial heterogeneity across funds exists. Returns persist strongly across subsequent funds of a partnership. Better performing partnerships are more likely to raise follow‐on funds and larger funds. This relationship is concave, so top performing partnerships grow proportionally less than average performers. At the industry level, market entry and fund performance are procyclical; however, established funds are less sensitive to cycles than new entrants. Several of these results differ markedly from those for mutual funds.
How Costly is Financial (Not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed
Published: 10/1998, Volume: 53, Issue: 5 | DOI: 10.1111/0022-1082.00062 | Cited by: 823
Gregor Andrade, Steven N. Kaplan
This paper studies thirty‐one highly leveraged transactions (HLTs) that become financially, not economically, distressed. The net effect of the HLT and financial distress (from pretransaction to distress resolution, market‐ or industry‐adjusted) is to increase value slightly. This finding strongly suggests that, overall, the HLTs of the late 1980s created value. We present quantitative and qualitative estimates of the (direct and indirect) costs of financial distress and their determinants. We estimate financial distress costs to be 10 to 20 percent of firm value. For a subset of firms that do not experience an adverse economic shock, financial distress costs are negligible.
Option Prices as Predictors of Equilibrium Stock Prices
Published: 9/1982, Volume: 37, Issue: 4 | DOI: 10.1111/j.1540-6261.1982.tb03597.x | Cited by: 214
STEVEN MANASTER, RICHARD J. RENDLEMAN
The Black‐Scholes option pricing model, modified for dividend payments, is used to calculate jointly implied stock prices and implied standard deviations. A comparison of the implied stock prices with observed stock prices reveals that the implied prices contain information regarding equilibrium stock prices that is not fully reflected in observed stock prices. The implications of this finding are discussed.
A Bayesian Approach to Real Options: The Case of Distinguishing between Temporary and Permanent Shocks
Published: 9/21/2010, Volume: 65, Issue: 5 | DOI: 10.1111/j.1540-6261.2010.01599.x | Cited by: 57
STEVEN R. GRENADIER, ANDREY MALENKO
Traditional real options models demonstrate the importance of the “option to wait” due to uncertainty over future shocks to project cash flows. However, there is often another important source of uncertainty: uncertainty over the permanence of past shocks. Adding Bayesian uncertainty over the permanence of past shocks augments the traditional option to wait with an additional “option to learn.” The implied investment behavior differs significantly from that in standard models. For example, investment may occur at a time of stable or decreasing cash flows, respond sluggishly to cash flow shocks, and depend on the timing of project cash flows.
Are CEOs Different?
Published: 4/2021, Volume: 76, Issue: 4 | DOI: 10.1111/jofi.13019 | Cited by: 72
STEVEN N. KAPLAN, MORTEN SORENSEN
Using 2,603 executive assessments, we study how CEO candidates differ from candidates for other top management positions, particularly CFOs. More than half of the variation in the 30 assessed characteristics is explained by four factors that we interpret as general ability, execution (vs. interpersonal), charisma (vs. analytical), and strategic (vs. managerial). CEO candidates have more extreme factor scores that differ significantly from those of CFO candidates. Conditional on being considered, candidates with greater general ability and interpersonal skills are more likely to be hired. These and our previous results on CEO success suggest that boards overweight interpersonal skills in hiring CEOs.
A PORTFOLIO APPROACH TO FOSSIL FUEL PROCUREMENT IN THE ELECTRIC UTILITY INDUSTRY
Published: 6/1976, Volume: 31, Issue: 3 | DOI: 10.1111/j.1540-6261.1976.tb01935.x | Cited by: 103
Dan Bar‐Lev, Steven Katz
Estimating the Tax Advantage of Corporate Debt
Published: 3/1983, Volume: 38, Issue: 1 | DOI: 10.1111/j.1540-6261.1983.tb03628.x | Cited by: 37
JOSEPH J. CORDES, STEVEN M. SHEFFRIN
This paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields. After describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance, we present estimates using the Treasury Corporate Tax Model of effective tax rates for a variety of industry groupings. Our estimates suggest that the after‐tax cost of debt varies widely across industries.
Collateralization, Bank Loan Rates, and Monitoring
Published: 5/11/2016, Volume: 71, Issue: 3 | DOI: 10.1111/jofi.12214 | Cited by: 256
GERALDO CERQUEIRO, STEVEN ONGENA, KASPER ROSZBACH
We show that collateral plays an important role in the design of debt contracts, the provision of credit, and the incentives of lenders to monitor borrowers. Using a unique data set from a large bank containing timely assessments of collateral values, we find that the bank responded to a legal reform that exogenously reduced collateral values by increasing interest rates, tightening credit limits, and reducing the intensity of its monitoring of borrowers and collateral, spurring borrower delinquency on outstanding claims. We thus explain why banks are senior lenders and quantify the value of claimant priority.
Animal Spirits, Margin Requirements, and Stock Price Volatility
Published: 6/1991, Volume: 46, Issue: 2 | DOI: 10.1111/j.1540-6261.1991.tb02682.x | Cited by: 36
PAUL H. KUPIEC, STEVEN A. SHARPE
A simple overlapping generations model is used to characterize the effects of initial margin requirements on the volatility of risky asset prices. Investors are assumed to exhibit heterogeneous preferences for risk‐bearing, the distribution of which evolves stochastically across generations. This framework is used to show that imposing a binding initial margin requirement may either increase or decrease stock price volatility, depending upon the microeconomic structure behind fluctuations in economy‐wide average risk‐bearing propensity. The ambiguous effect on volatility similarly arises when the source of heterogeneity is noise trader beliefs.
Delayed Reaction to Good News and the Cross‐Autocorrelation of Portfolio Returns
Published: 7/1996, Volume: 51, Issue: 3 | DOI: 10.1111/j.1540-6261.1996.tb02711.x | Cited by: 137
GRANT MCQUEEN, MICHAEL PINEGAR, STEVEN THORLEY
We document a directional asymmetry in the small stock concurrent and lagged response to large stock movements. When returns on large stocks are negative, the concurrent beta for small stocks is high, but the lagged beta is insignificant. When returns on large stocks are positive, small stocks have small concurrent betas and very significant lagged betas. That is, the cross‐autocorrelation puzzle documented by Lo and MacKinlay (1990a) is associated with a slow response by some small stocks to good, but not to bad, common news. Time series portfolio tests and cross‐sectional tests of the delay for individual securities suggest that existing explanations of the cross‐autocorrelation puzzle based on data mismeasurement, minor market imperfections, or time‐varying risk premiums fail to capture the directional asymmetry in the data.
The Valuation of Cash Flow Forecasts: An Empirical Analysis
Published: 9/1995, Volume: 50, Issue: 4 | DOI: 10.1111/j.1540-6261.1995.tb04050.x | Cited by: 348
STEVEN N. KAPLAN, RICHARD S. RUBACK
This article compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. For our sample of 51 HLTs completed between 1983 and 1989, the valuations of discounted cash flow forecasts are within 10 percent, on average, of the market values of the completed transactions. Our valuations perform at least as well as valuation methods using comparable companies and transactions. We also invert our analysis by estimating the risk premia implied by transaction values and forecast cash flows, and relating those risk premia to firm and industry betas, firm size, and firm book‐to‐market ratios.
The Success of Acquisitions: Evidence from Divestitures
Published: 3/1992, Volume: 47, Issue: 1 | DOI: 10.1111/j.1540-6261.1992.tb03980.x | Cited by: 546
STEVEN N. KAPLAN, MICHAEL S. WEISBACH
This paper studies a sample of large acquisitions completed between 1971 and 1982. By the end of 1989, acquirers have divested almost 44% of the target companies. We characterize the ex post success of the divested acquisitions and consider 34% to 50% of classified divestitures as unsuccessful. Acquirer returns and total (acquirer and target) returns at the acquisition announcement are significantly lower for unsuccessful divestitures than for successful divestitures and acquisitions not divested. Although diversifying acquisitions are almost four times more likely to be divested than related acquisitions, we do not find strong evidence that diversifying acquisitions are less successful than related ones.
THE PROFITABILITY OF MULTIBANK HOLDING COMPANY ACQUISITIONS
Published: 3/1974, Volume: 29, Issue: 1 | DOI: 10.1111/j.1540-6261.1974.tb00032.x | Cited by: 16
Thomas R. Piper, Steven J. Weiss
What Lockbox and Disbursement Models Really Do
Published: 5/1983, Volume: 38, Issue: 2 | DOI: 10.1111/j.1540-6261.1983.tb02241.x | Cited by: 1
STEVEN F. MAIER, JAMES H. VANDER WEIDE
The Impact of Bank Consolidation on Commercial Borrower Welfare
Published: 8/2005, Volume: 60, Issue: 4 | DOI: 10.1111/j.1540-6261.2005.00787.x | Cited by: 132
JASON KARCESKI, STEVEN ONGENA, DAVID C. SMITH
We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger‐induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship.
New Evidence on The January Effect Before Personal Income Taxes
Published: 12/1991, Volume: 46, Issue: 5 | DOI: 10.1111/j.1540-6261.1991.tb04649.x | Cited by: 44
STEVEN L. JONES, WINSON LEE, RUDOLF APENBRINK
We examine the returns of stocks in Cowles Industrial Index before and after the introduction of personal income taxes in 1917. This is distinct from earlier studies because we cross‐sectionally analyze the relationship between the returns of the individual stocks and measures of tax‐loss selling potential and size. We find that excess returns at the turn‐of‐the‐year and for the month of January were not significant until after 1917. These results provide strong support for the tax‐loss selling hypothesis as an explanation for the January seasonal in the returns of small firms.
Does Corporate Lending by Banks and Finance Companies Differ? Evidence on Specialization in Private Debt Contracting
Published: 6/1998, Volume: 53, Issue: 3 | DOI: 10.1111/0022-1082.00037 | Cited by: 294
Mark Carey, Mitch Post, Steven A. Sharpe
This paper establishes empirically the existence of specialization in private‐market corporate lending, adding a new dimension to the public versus private debt distinctions now common in the literature. Comparing corporate loans made by banks and by finance companies, we find that the two types of intermediaries are equally likely to finance information‐problematic firms. However, finance companies tend to serve observably riskier borrowers, particularly more leveraged borrowers. Evidence supports both regulatory and reputation‐based explanations for this specialization. In passing, we shed light on various theories of debt contracting and intermediation and present facts about finance companies.
Exploring the Nature of “Trader Intuition”
Published: 9/21/2010, Volume: 65, Issue: 5 | DOI: 10.1111/j.1540-6261.2010.01591.x | Cited by: 111
ANTOINE J. BRUGUIER, STEVEN R. QUARTZ, PETER BOSSAERTS
Experimental evidence has consistently confirmed the ability of uninformed traders, even novices, to infer information from the trading process. After contrasting brain activation in subjects watching markets with and without insiders, we hypothesize that Theory of Mind (ToM) helps explain this pattern, where ToM refers to the human capacity to discern malicious or benevolent intent. We find that skill in predicting price changes in markets with insiders correlates with scores on two ToM tests. We document GARCH‐like persistence in transaction price changes that may help investors read markets when there are insiders.
Should Investors Bet on the Jockey or the Horse? Evidence from the Evolution of Firms from Early Business Plans to Public Companies
Published: 1/23/2009, Volume: 64, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01429.x | Cited by: 313
STEVEN N. KAPLAN, BERK A. SENSOY, PER STRÖMBERG
We study how firm characteristics evolve from early business plan to initial public offering (IPO) to public company for 50 venture capital (VC)‐financed companies. Firm business lines remain remarkably stable while management turnover is substantial. Management turnover is positively related to alienable asset formation. We obtain similar results using all 2004 IPOs, suggesting that our main results are not specific to VC‐backed firms or the time period. The results suggest that, at the margin, investors in start‐ups should place more weight on the business (“the horse”) than on the management team (“the jockey”). The results also inform theories of the firm.
Intraday Patterns in the Cross‐section of Stock Returns
Published: 7/15/2010, Volume: 65, Issue: 4 | DOI: 10.1111/j.1540-6261.2010.01573.x | Cited by: 176
STEVEN L. HESTON, ROBERT A. KORAJCZYK, RONNIE SADKA
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross‐section of stock returns. We find a striking pattern of return continuation at half‐hour intervals that are exact multiples of a trading day, and this effect lasts for at least 40 trading days. Volume, order imbalance, volatility, and bid‐ask spreads exhibit similar patterns, but do not explain the return patterns. We also show that short‐term return reversal is driven by temporary liquidity imbalances lasting less than an hour and bid‐ask bounce. Timing trades can reduce execution costs by the equivalent of the effective spread.
Which CEO Characteristics and Abilities Matter?
Published: 5/21/2012, Volume: 67, Issue: 3 | DOI: 10.1111/j.1540-6261.2012.01739.x | Cited by: 626
STEVEN N. KAPLAN, MARK M. KLEBANOV, MORTEN SORENSEN
We exploit a unique data set to study individual characteristics of CEO candidates for companies involved in buyout and venture capital transactions and relate these characteristics to subsequent corporate performance. CEO candidates vary along two primary dimensions: one that captures general ability and another that contrasts communication and interpersonal skills with execution skills. We find that subsequent performance is positively related to general ability and execution skills. The findings expand our view of CEO characteristics and types relative to previous studies.
Private Equity Performance: What Do We Know?
Published: 9/12/2014, Volume: 69, Issue: 5 | DOI: 10.1111/jofi.12154 | Cited by: 507
ROBERT S. HARRIS, TIM JENKINSON, STEVEN N. KAPLAN
We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.
Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom
Published: 1/23/2009, Volume: 64, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01431.x | Cited by: 1615
JAMES R. BROWN, STEVEN M. FAZZARI, BRUCE C. PETERSEN
The financing of R&D provides a potentially important channel to link finance and economic growth, but there is no direct evidence that financial effects are large enough to impact aggregate R&D. U.S. firms finance R&D from volatile sources: cash flow and stock issues. We estimate dynamic R&D models for high‐tech firms and find significant effects of cash flow and external equity for young, but not mature, firms. The financial coefficients for young firms are large enough that finance supply shifts can explain most of the dramatic 1990s R&D boom, which implies a significant connection between finance, innovation, and growth.
AN EVALUATION OF ALTERNATIVE EMPIRICAL MODELS OF THE TERM STRUCTURE OF INTEREST RATES*
Published: 9/1976, Volume: 31, Issue: 4 | DOI: 10.1111/j.1540-6261.1976.tb01959.x | Cited by: 6
Steven W. Dobson, Richard C. Sutch, David E. Vanderford
The Effects of Stock Lending on Security Prices: An Experiment
Published: 9/10/2013, Volume: 68, Issue: 5 | DOI: 10.1111/jofi.12051 | Cited by: 83
STEVEN N. KAPLAN, TOBIAS J. MOSKOWITZ, BERK A. SENSOY
We examine the impact of short selling by conducting a randomized stock lending experiment. Working with a large, anonymous money manager, we create an exogenous and sizeable shock to the supply of lendable shares by taking high loan fee stocks in the manager's portfolio and randomly making available and withholding stocks from the lending market. The experiment ran in two independent phases: the first, from September 5 to 18, 2008, with over $580 million of securities lent, and the second, from June 5 to September 30, 2009, with over $250 million of securities lent. While the supply shocks significantly reduce market lending fees and raise quantities, we find no evidence that returns, volatility, skewness, or bid–ask spreads are affected. The results provide novel evidence on the impact of shorting supply and do not indicate any adverse effects on stock prices from securities lending.