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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Search results: 3.
Corporate Scandals and Household Stock Market Participation
Published: 02/19/2016 | DOI: 10.1111/jofi.12399
MARIASSUNTA GIANNETTI, TRACY YUE WANG
We show that, after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as nonfraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market.
Corporate Fraud and Business Conditions: Evidence from IPOs
Published: 11/09/2010 | DOI: 10.1111/j.1540-6261.2010.01615.x
TRACY YUE WANG, ANDREW WINTON, XIAOYUN YU
We examine how a firm's incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases when beliefs are extremely high. We find that two mechanisms are at work: monitoring by investors and short‐term executive compensation, both of which vary with investor beliefs about industry prospects. We also find that monitoring incentives of investors and underwriters differ. Our results are consistent with models of investor beliefs and corporate fraud, and suggest that regulators and auditors should be vigilant for fraud during booms.
Do Equity Markets Care about Income Inequality? Evidence from Pay Ratio Disclosure
Published: 02/06/2022 | DOI: 10.1111/jofi.13113
YIHUI PAN, ELENA S. PIKULINA, STEPHAN SIEGEL, TRACY YUE WANG
We examine equity markets’ reaction to the first‐time disclosure of the CEO‐worker pay ratio by U.S. public companies in 2018. We find that firms disclosing higher pay ratios experience significantly lower abnormal announcement returns. Firms whose shareholders are more inequality‐averse experience a more negative market response to high pay ratios. Furthermore, during 2018 more inequality‐averse investors rebalance their portfolios away from stocks with a high pay ratio relative to other investors. Our results suggest that equity markets are concerned about high within‐firm pay dispersion, and investors’ inequality aversion is a channel through which high pay ratios negatively affect firm value.