The Journal of Finance

Firm Value and Hedging: Evidence from U.S. Oil and Gas Producers

Published: 3/9/2006,  Volume: 61,  Issue: 2  |  DOI: 10.1111/j.1540-6261.2006.00858.x  |  Cited by: 511

YANBO JIN, PHILIPPE JORION

This paper studies the hedging activities of 119 U.S. oil and gas producers from 1998 to 2001 and evaluates their effect on firm value. Theories of hedging based on market imperfections imply that hedging should increase the firm's market value (MV). To test this hypothesis, we collect detailed information on the extent of hedging and on the valuation of oil and gas reserves. We verify that hedging reduces the firm's stock price sensitivity to oil and gas prices. Contrary to previous studies, however, we find that hedging does not seem to affect MVs for this industry.

Capital Gains Tax Overhang and Price Pressure

Published: 5/16/2006,  Volume: 61,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2006.00876.x  |  Cited by: 109

LI JIN

I study whether the capital gains tax is an impediment to selling by some investors and if so, to what degree associated delayed selling affects stock prices. I find that selling decisions by institutions serving tax‐sensitive clients are sensitive to cumulative capital gains, a pattern not observed for institutions with predominantly tax‐exempt clients. Moreover, tax‐related underselling impacts stock prices during large earnings surprises for stocks held primarily by tax‐sensitive investors. The corresponding price reactions are less negative (more positive) with higher cumulative capital gains. This price pressure pattern is more severe when arbitrage is more costly.

The Golden Mean: The Risk‐Mitigating Effect of Combining Tournament Rewards with High‐Powered Incentives

Published: 7/23/2022,  Volume: 77,  Issue: 5  |  DOI: 10.1111/jofi.13169  |  Cited by: 3

DUNHONG JIN, THOMAS NOE

The rewards received by financial managers depend on both relative performance (e.g., fund inflows based on fund rankings, promotions based on peer comparisons) and absolute performance (e.g., bonus payments for meeting accounting targets, hedge‐fund incentive fees). Both relative and absolute performance rewards engender risk‐taking. In this paper, we show that these two sources of risk‐taking, relative and absolute performance rewards, mitigate the risk‐taking incentives produced by the other. This mutual incentive‐reduction effect generates a number of novel predictions about the relationship of managerial risk‐taking with the structure of relative and absolute performance rewards.

Artificial Intelligence, Education, and Entrepreneurship

Published: 12/23/2023,  Volume: 79,  Issue: 1  |  DOI: 10.1111/jofi.13302  |  Cited by: 114

MICHAEL GOFMAN, ZHAO JIN

We document an unprecedented brain drain of Artificial Intelligence (AI) professors from universities from 2004 to 2018. We find that students from the affected universities establish fewer AI startups and raise less funding. The brain‐drain effect is significant for tenured professors, professors from top universities, and deep‐learning professors. Additional evidence suggests that unobserved city‐ and university‐level shocks are unlikely to drive our results. We consider several economic channels for the findings. The most consistent explanation is that professors' departures reduce startup founders' AI knowledge, which we find is an important factor for successful startup formation and fundraising.

Transparency and International Portfolio Holdings

Published: 11/10/2005,  Volume: 60,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2005.00823.x  |  Cited by: 390

R. GASTON GELOS, SHANG‐JIN WEI

Does country transparency affect international portfolio investment? We examine this question by constructing new measures of transparency and by making use of a unique microdata set on portfolio holdings of emerging market funds around the world. We distinguish between government and corporate transparency. There is clear evidence that funds systematically invest less in less transparent countries. Moreover, funds have a greater propensity to exit nontransparent countries during crises.

The Geography of Block Acquisitions

Published: 11/11/2008,  Volume: 63,  Issue: 6  |  DOI: 10.1111/j.1540-6261.2008.01414.x  |  Cited by: 346

JUN‐KOO KANG, JIN‐MO KIM

Using a large sample of partial block acquisitions, we examine the importance of geographic proximity in corporate governance and target returns. We find that block acquirers have a strong preference for geographically proximate targets and acquirers that purchase shares in such targets are more likely to engage in post‐acquisition target governance activities than are remote block acquirers. Moreover, the targets of these acquirers realize higher announcement returns and better post‐acquisition operating performance than do targets of other types of acquirers, particularly when they face greater information asymmetries.

Prospect Theory and Stock Market Anomalies

Published: 6/18/2021,  Volume: 76,  Issue: 5  |  DOI: 10.1111/jofi.13061  |  Cited by: 188

NICHOLAS BARBERIS, LAWRENCE J. JIN, BAOLIAN WANG

We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 23 prominent stock market anomalies. The model incorporates all of the elements of prospect theory, accounts for investors' prior gains and losses, and makes quantitative predictions about an asset's average return based on empirical estimates of the asset's return volatility, return skewness, and past capital gain. We find that the model can help explain a majority of the 23 anomalies.

Analysts' Selective Coverage and Subsequent Performance of Newly Public Firms

Published: 5/16/2006,  Volume: 61,  Issue: 3  |  DOI: 10.1111/j.1540-6261.2006.00869.x  |  Cited by: 142

SOMNATH DAS, RE‐JIN GUO, HUAI ZHANG

This study examines the ability of analysts to forecast future firm performance, based on the selective coverage of newly public firms. We hypothesize that the decision to provide coverage contains information about an analyst's underlying expectation of a firm's future prospects. We extract this expectation by obtaining residual analyst coverage from a model of initial analyst following. We document that in the three subsequent years, initial public offerings with high residual coverage have significantly better returns and operating performance than those with low residual coverage. This evidence indicates analysts have superior predictive abilities and selectively provide coverage for firms about which their true expectations are favorable.

Tunneling or Value Added? Evidence from Mergers by Korean Business Groups

Published: 12/2002,  Volume: 57,  Issue: 6  |  DOI: 10.1111/1540-6261.00510  |  Cited by: 939

Kee‐Hong Bae, Jun‐Koo Kang, Jin‐Mo Kim

We examine whether firms belonging to Korean business groups (chaebols) benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms (tunneling). We find that when a chaebol‐affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebol‐affiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis.