The Journal of Finance

Top‐Management Compensation and Capital Structure

Published: 7/1993,  Volume: 48,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1993.tb04026.x  |  Cited by: 407

TERESA A. JOHN, KOSE JOHN

The interrelationship between top‐management compensation and the design and mix of external claims issued by a firm is studied. The optimal managerial compensation structures depend on not only the agency relationship between shareholders and management, but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus. We analyze in detail the optimal management compensation for the cases when the external claims are (1) equity and risky debt, and (2) equity and convertible debt. In addition to the role of aligning managerial incentives with shareholder interests, managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt. The optimal management compensation derived has low pay‐performance sensitivity. With convertible debt, instead of straight debt, the corresponding optimal managerial compensation has high pay‐to‐performance sensitivity. A negative relationship between pay‐performance sensitivity and leverage is derived. Our results provide a reconciliation of the puzzling evidence of Jensen and Murphy ( 1990 ) with agency theory. Other testable implications include (1) a relationship between the risk premium in corporate bond yields and top‐management compensation structures, and (2) the announcement effect of adoption of executive stock option plans on bond prices. The model yields implications for management compensation in banks and Federal Deposit Insurance reform. Our results explain the dynamics of top‐management compensation in firms going through financial distress and reorganization.

Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code

Published: 11/18/2019,  Volume: 75,  Issue: 1  |  DOI: 10.1111/jofi.12846  |  Cited by: 58

KEVIN ARETZ, MURILLO CAMPELLO, MARIA‐TERESA MARCHICA

France's Ordonnance 2006‐346 repudiated the notion of possessory ownership in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. A differences‐test strategy shows that firms operating newly pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real‐side outcomes. Start‐ups emerged with higher “at‐inception” leverage, located farther from large cities, with more assets‐in‐place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.

What Moves the Stock and Bond Markets? A Variance Decomposition for Long‐Term Asset Returns

Published: 3/1993,  Volume: 48,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1993.tb04700.x  |  Cited by: 371

JOHN Y. CAMPBELL, JOHN AMMER

This paper uses a vector autoregressive model to decompose excess stock and 10‐year bond returns into changes in expectations of future stock dividends, inflation, short‐term real interest rates, and excess stock and bond returns. In monthly postwar U.S. data, stock and bond returns are driven largely by news about future excess stock returns and inflation, respectively. Real interest rates have little impact on returns, although they do affect the short‐term nominal interest rate and the slope of the term structure. These findings help to explain the low correlation between excess stock and bond returns.

Asset Writedowns: Managerial Incentives and Security Returns

Published: 7/1987,  Volume: 42,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1987.tb04574.x  |  Cited by: 239

JOHN S. STRONG, JOHN R. MEYER

Evaluating and Comparing Projects: Simple Detection of False Alarms

Published: 12/1979,  Volume: 34,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1979.tb00068.x  |  Cited by: 11

JOHN W. PRATT, JOHN S. HAMMOND

Explaining the Poor Performance of Consumption‐based Asset Pricing Models

Published: 12/2000,  Volume: 55,  Issue: 6  |  DOI: 10.1111/0022-1082.00310  |  Cited by: 203

John Y. Campbell, John H. Cochrane

We show that the external habit‐formation model economy of Campbell and Cochrane (1999) can explain why the Capital Asset Pricing Model (CAPM) and its extensions are betterapproximate asset pricing models than is the standard onsumption‐based model. The model economy produces time‐varying expected eturns, tracked by the dividend–price ratio. Portfolio‐based models capture some of this variation in state variables, which a state‐independent function of consumption cannot capture. Therefore, though the consumption‐based model and CAPM are both perfect conditional asset pricing models, the portfolio‐based models are better approximate unconditional asset pricing models.

SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATION*

Published: 12/1965,  Volume: 20,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1965.tb02930.x  |  Cited by: 438

John Lintner

INFLATION AND SECURITY RETURNS*

Published: 5/1975,  Volume: 30,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1975.tb01809.x  |  Cited by: 64

John Lintner

BANK RESERVE REQUIREMENTS AND HOW THEIR EFFECTIVENESS AS AN INSTRUMENT OF MONETARY CONTROL MAY BE ENHANCED*

Published: 3/1956,  Volume: 11,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1956.tb00690.x  |  Cited by: 0

John Livingston

Risk‐Shifting Incentives and Signalling Through Corporate Capital Structure

Published: 7/1987,  Volume: 42,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1987.tb04573.x  |  Cited by: 33

KOSE JOHN

This paper examines optimal corporate financing arrangements under asymmetric information for different patterns of temporal resolution of uncertainty in the underlying technology. An agency problem, a signalling problem and an agency‐signalling problem arise as special cases. The associated informational equilibria and the optimal financing arrangements are characterized and compared. In the agency‐signalling equilibrium the private information of corporate insiders at the time of financing is signalled through capital structure choices which deviate optimally from agency‐cost minimizing financing arrangements, which in turn induce risk‐shifting incentives in the investment policy. In the pure signalling case the equilibrium is characterized by direct contractual precommitments to implement investment policies which are riskier than pareto‐optimal levels. Empirical implications for debt covenants and the announcement effect of investment policies and leverage increasing transactions on existing stock and bond prices are explicitly derived.

Competition and Misconduct

Published: 4/12/2023,  Volume: 78,  Issue: 4  |  DOI: 10.1111/jofi.13227  |  Cited by: 18

JOHN THANASSOULIS

Misconduct is widespread. Practices such as misselling, pump and dump, and money laundering cause harm while raising profits. This paper presents a mechanism that can determine what sorts of misconduct can be sustained in competitive equilibrium in concentrated markets, oligopoly settings, and markets with many small competing firms. The model studied allows general demand and distinguishes types of ethical dilemma using current psychological understanding. The paper shows, for example, that markets with many small competing firms are not vulnerable to misconduct if firms respond to entry with niche strategies or if the ethical dilemma draws an emotional response.

MONETARY POLICY AND EXTERNAL SURPLUSES: THE GERMAN EXPERIENCE, 1955–61*

Published: 9/1963,  Volume: 18,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1963.tb02855.x  |  Cited by: 0

John Hein

WEALTH, WELFARE, AND THE PRICE OF RISK

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00970.x  |  Cited by: 12

John Long

DISCUSSION

Published: 5/1972,  Volume: 27,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1972.tb00972.x  |  Cited by: 1

John Lintner

The Case for Intervening in Bankers’ Pay

Published: 5/21/2012,  Volume: 67,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2012.01736.x  |  Cited by: 116

JOHN THANASSOULIS

This paper studies the default risk of banks generated by investment and remuneration pressures. Competing banks prefer to pay their banking staff in bonuses and not in fixed wages as risk sharing on the remuneration bill is valuable. Competition for bankers generates a negative externality, driving up market levels of banker remuneration and hence rival banks’ default risk. Optimal financial regulation involves an appropriately structured limit on the proportion of the balance sheet used for bonuses. However, stringent bonus caps are value destroying, default risk enhancing, and suboptimal for regulators who control only a small number of banks.

THE COUPON EFFECT ON YIELD TO MATURITY

Published: 3/1977,  Volume: 32,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1977.tb03245.x  |  Cited by: 23

John Caks

THE COST OF CAPITAL AND OPTIMAL FINANCING OF CORPORATE GROWTH

Published: 5/1963,  Volume: 18,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1963.tb00725.x  |  Cited by: 35

John Lintner

A NOTE ON THE GIRO TRANSFER SYSTEM

Published: 12/1959,  Volume: 14,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1959.tb00145.x  |  Cited by: 6

John Hein

DISCUSSION

Published: 5/1981,  Volume: 36,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1981.tb00443.x  |  Cited by: 0

JOHN LINTNER

Risk Adjusted Equity Performance Measurement

Published: 5/1982,  Volume: 37,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1982.tb03576.x  |  Cited by: 1

JOHN NAGORNIAK

Nontransferable Interest‐Bearing National Debt

Published: 9/1980,  Volume: 35,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1980.tb03518.x  |  Cited by: 2

JOHN BRYANT

TOWARD A THEORY OF WORKING CAPITAL MANAGEMENT

Published: 5/1955,  Volume: 10,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1955.tb01259.x  |  Cited by: 23

John Sagan

CORPORATE DEBT DECISIONS: A NEW ANALYTICAL FRAMEWORK

Published: 12/1978,  Volume: 33,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1978.tb03421.x  |  Cited by: 4

John Caks

Efficient Funds in a Financial Market with Options: a New Irrelevance Proposition

Published: 6/1981,  Volume: 36,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1981.tb00653.x  |  Cited by: 13

KOSE JOHN

Under the same assumptions that Ross used to assert the existence of an efficient fund (on which a spanning set of options can be written) we prove that almost any portfolio is an efficient fund. From a constructive point of view, a randomly chosen vector of portfolio weights yields an efficient fund. When the Ross assumptions are relaxed, a limited notion of efficiency‐maximal efficiency‐is the best attainable. The maximally efficient funds are also everywhere dense in the portfolio space. Some implications are discussed and illustrative examples given.

A NOTE ON THE USE OF INDEX CLAUSES ABROAD

Published: 12/1960,  Volume: 15,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1960.tb02768.x  |  Cited by: 0

John Hein

The Volatility and Price Sensitivities of Managerial Stock Option Portfolios and Corporate Hedging

Published: 4/2002,  Volume: 57,  Issue: 2  |  DOI: 10.1111/1540-6261.00442  |  Cited by: 339

John D. Knopf, Jouahn Nam, John H. Thornton

We use estimates of the Black—Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of managers' stock and stock option portfolios to stock price to test the relationship between managers' risk preferences and hedging activities. We find that as the sensitivity of managers' stock and stock option portfolios to stock price increases, firms tend to hedge more. However, as the sensitivity of managers' stock option portfolios to stock return volatility increases, firms tend to hedge less.

DISCUSSION

Published: 5/1980,  Volume: 35,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1980.tb02177.x  |  Cited by: 0

John J. McConnell

CAPITAL APPROPRIATIONS AND BUSINESS FIXED INVESTMENT IN MANUFACTURING: AN ECONOMETRIC ANALYSIS*

Published: 6/1969,  Volume: 24,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1969.tb00374.x  |  Cited by: 0

John C. Hambor

MONETARY POLICY AND THE FORWARD EXCHANGE MARKET

Published: 12/1961,  Volume: 16,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1961.tb04236.x  |  Cited by: 1

John H. Auten

Estimating the Strategic Value of Long‐Term Forward Purchase Contracts Using Auction Models

Published: 9/1989,  Volume: 44,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1989.tb02634.x  |  Cited by: 3

JOHN E. PARSONS

We demonstrate how an auction model can be used in a traditional capital budgeting context to assign a value to the strategic advantage of long‐term forward contracts. Research in the field of industrial organization has pointed to the danger of ex post opportunistic bargaining as a motivation for the use of forward contracts in natural resources and manufactured products, but no operational procedure exists for estimating the value secured by these contracts. Arbitrage methods for valuing forward contracts assume a competitive market in which the factors creating the bargaining problem and motivating the use of long‐term contracts are not present. Use of the model is illustrated in the case of take‐or‐pay contracts for natural gas.

CONSUMER CREDIT INSURANCE IN NEBRASKA*

Published: 3/1960,  Volume: 15,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1960.tb04846.x  |  Cited by: 1

John B. Minick

THE EXISTENCE OF ECONOMIES OF STRUCTURE AND OF SCALE IN COMMERCIAL BANKING*

Published: 6/1968,  Volume: 23,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1968.tb00837.x  |  Cited by: 0

John A. Powers

SOME ASPECTS OF THE PERFORMANCE OF NON‐CONVERTIBLE PREFERRED STOCKS

Published: 12/1973,  Volume: 28,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1973.tb01450.x  |  Cited by: 12

John S. Bildersee

A STATISTICAL ANALYSIS OF MEMBER BANK PROFITABILITY DIFFERENCES*

Published: 12/1967,  Volume: 22,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1967.tb00308.x  |  Cited by: 0

John A. Haslem

A TIME SERIES ANALYSIS OF POST‐ACCORD INTEREST RATES: COMMENT

Published: 9/1974,  Volume: 29,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1974.tb03110.x  |  Cited by: 2

John E. Pippenger

A Mean‐Variance Benchmark for Intertemporal Portfolio Theory

Published: 1/7/2014,  Volume: 69,  Issue: 1  |  DOI: 10.1111/jofi.12099  |  Cited by: 80

JOHN H. COCHRANE

Mean‐variance portfolio theory can apply to streams of payoffs such as dividends following an initial investment. This description is useful when returns are not independent over time and investors have nonmarketed income. Investors hedge their outside income streams. Then, their optimal payoff is split between an indexed perpetuity—the risk‐free payoff—and a long‐run mean‐variance efficient payoff. “Long‐run” moments sum over time as well as states of nature. In equilibrium, long‐run expected returns vary with long‐run market betas and outside‐income betas. State‐variable hedges do not appear.

REGULATORY INFLUENCE ON BANK CAPITAL INVESTMENT

Published: 9/1975,  Volume: 30,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1975.tb01026.x  |  Cited by: 35

John J. Mingo

THE AVAILABILITY OF CREDIT AND CORPORATE INVESTMENT*

Published: 6/1970,  Volume: 25,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1970.tb00541.x  |  Cited by: 0

John H. Hand

MORTGAGE COMPANIES: A FINANCIAL MODEL AND EVALUATION OF THEIR RESIDENTIAL REAL ESTATE LENDING ACTIVITIES*

Published: 9/1975,  Volume: 30,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1975.tb01040.x  |  Cited by: 0

John J. McConnell

SOME POSTWAR TRENDS IN MUNICIPAL BOND FINANCING*

Published: 5/1962,  Volume: 17,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1962.tb04278.x  |  Cited by: 0

John L. O'Donnell

AMERICAN AND CANADIAN EXPERIENCE WITH THE SALES TAX*

Published: 9/1952,  Volume: 7,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1952.tb00097.x  |  Cited by: 0

John F. Due

Presidential Address: Discount Rates

Published: 7/19/2011,  Volume: 66,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2011.01671.x  |  Cited by: 1882

JOHN H. COCHRANE

Discount‐rate variation is the central organizing question of current asset‐pricing research. I survey facts, theories, and applications. Previously, we thought returns were unpredictable, with variation in price‐dividend ratios due to variation in expected cashflows. Now it seems all price‐dividend variation corresponds to discount‐rate variation. We also thought that the cross‐section of expected returns came from the CAPM. Now we have a zoo of new factors. I categorize discount‐rate theories based on central ingredients and data sources. Incorporating discount‐rate variation affects finance applications, including portfolio theory, accounting, cost of capital, capital structure, compensation, and macroeconomics.

DISCUSSION

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00508.x  |  Cited by: 0

John P. Shelton

“STRICT” RANDOM WALKS: A FRAMEWORK FOR RESEARCH

Published: 6/1969,  Volume: 24,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1969.tb00384.x  |  Cited by: 0

John Michael Murphy

SOME THEORETICAL AND EMPIRICAL CONSIDERATIONS RELATIVE TO THE TERM STRUCTURE OF INTEREST RATES*

Published: 9/1969,  Volume: 24,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1969.tb00403.x  |  Cited by: 0

John A. Naylor

RISK IN THE EVALUATION OF PENSION FUND PERFORMANCE

Published: 12/1969,  Volume: 24,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1969.tb01718.x  |  Cited by: 0

John Michael Murphy

Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price Tender Offers

Published: 9/1994,  Volume: 49,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1994.tb02458.x  |  Cited by: 34

JOHN C. PERSONS

This article presents a model of repurchase tender offers in which firms choose between the Dutch auction method and the fixed price method. Dutch auction repurchases are more effective takeover deterrents, while fixed price repurchases are more effective signals of undervaluation. The model yields empirical implications regarding price effects of repurchases, likelihood of takeover, managerial compensation, and cross‐sectional differences in the elasticity of the supply curve for shares.

THE NATURE OF THE CONFLICT BETWEEN TRANSACTORS' EXPECTATIONS OF CAPITAL GAIN

Published: 9/1978,  Volume: 33,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1978.tb02050.x  |  Cited by: 3

John T. Bart

A REAPPRAISAL OF THE CONCEPT, POTENTIALITIES, AND LIMITATIONS OF FISCAL POLICY IN THE AMERICAN ECONOMY*

Published: 3/1954,  Volume: 9,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1954.tb01211.x  |  Cited by: 0

Robert John Schier

TIME LAPSE AND CYCLICAL CHANGES IN COMMERCIAL BANK INVESTMENT PORTFOLIOS, 1949–1961^*

Published: 3/1967,  Volume: 22,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1967.tb01661.x  |  Cited by: 0

John W. Bay