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: 6.
A Theory of Zombie Lending
Published: 4/26/2021, Volume: 76, Issue: 4 | DOI: 10.1111/jofi.13022 | Cited by: 91
YUNZHI HU, FELIPE VARAS
An entrepreneur borrows from a relationship bank or the market. The bank has a higher cost of capital but produces private information over time. While the entrepreneur accumulates reputation as the lending relationship continues, asymmetric information is also developed between the bank/entrepreneur and the market. In this setting, zombie lending is inevitable: Once the entrepreneur becomes sufficiently reputable, the bank will roll over loans even after learning bad news, for the prospect of future market financing. Zombie lending is mitigated when the entrepreneur faces financial constraints. Finally, the bank stops producing information too early if information production is costly.
Pledgeability, Industry Liquidity, and Financing Cycles
Published: 7/26/2019, Volume: 75, Issue: 1 | DOI: 10.1111/jofi.12831 | Cited by: 34
DOUGLAS W. DIAMOND, YUNZHI HU, RAGHURAM G. RAJAN
Why do firms choose high debt when they anticipate high valuations, and underperform subsequently? We propose a theory of financing cycles where the importance of creditors’ control rights over cash flows (“pledgeability”) varies with industry liquidity. The market allows firms take on more debt when they anticipate higher future liquidity. However, both high anticipated liquidity and the resulting high debt limit their incentives to enhance pledgeability. This has prolonged adverse effects in a downturn. Because these effects are hard to contract upon, higher anticipated liquidity can also reduce a firm's current access to finance.
Persuading Investors: A Video‐Based Study
Published: 8/14/2025, Volume: 80, Issue: 5 | DOI: 10.1111/jofi.13471 | Cited by: 31
ALLEN HU, SONG MA
Persuasive communication functions through not only content but also delivery—facial expression, tone of voice, and diction. This paper examines the persuasiveness of delivery in startup pitches. Using machine learning algorithms to process full pitch videos, we quantify persuasion in visual, vocal, and verbal dimensions. We find that positive (i.e., passionate, warm) pitches increase funding probability. However, conditional on funding, startups with higher levels of pitch positivity underperform. Women are more heavily judged on delivery when evaluated in single‐gender teams, but they are neglected when copitching in mixed‐gender teams. Using an experiment, we show that persuasion delivery works mainly through leading investors to form inaccurate beliefs.
The Allocation of Capital Between Residential and Nonresidential Uses: Taxes, Inflation and Capital Market Constraints
Published: 6/1983, Volume: 38, Issue: 3 | DOI: 10.1111/j.1540-6261.1983.tb02502.x | Cited by: 13
PATRIC H. HENDERSHOTT, SHENG CHENG HU
We have constructed a simple two‐sector model of the demand for housing and corporate capital. Economic growth and an increase in the inflation rate were then simulated with a number of model variants. The model and simulation experiments illustrate both the tax bias in favor of housing and the manner in which the increase in inflation between 1965 and 1978 magnified it. The existence of capital‐market constraints offsets the bias against corporate capital, but it introduces a sharp, inefficient reallocation of housing from less wealthy, constrained households to wealthy households who do not have gains on mortgages and are not financially constrained.
The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks
Published: 3/2/2005, Volume: 60, Issue: 2 | DOI: 10.1111/j.1540-6261.2005.00742.x | Cited by: 577
JOHN H. BOYD, JIAN HU, RAVI JAGANNATHAN
We find that on average, an announcement of rising unemployment is good news for stocks during economic expansions and bad news during economic contractions. Unemployment news bundles three types of primitive information relevant for valuing stocks: information about future interest rates, the equity risk premium, and corporate earnings and dividends. The nature of the information bundle, and hence the relative importance of the three effects, changes over time depending on the state of the economy. For stocks as a group, information about interest rates dominates during expansions and information about future corporate dividends dominates during contractions.
Noise as Information for Illiquidity
Published: 11/12/2013, Volume: 68, Issue: 6 | DOI: 10.1111/jofi.12083 | Cited by: 409
GRACE XING HU, JUN PAN, JIANG WANG
We propose a market‐wide liquidity measure by exploiting the connection between the amount of arbitrage capital in the market and observed “noise” in U.S. Treasury bonds—the shortage of arbitrage capital allows yields to deviate more freely from the curve, resulting in more noise in prices. Our noise measure captures episodes of liquidity crises of different origins across the financial market, providing information beyond existing liquidity proxies. Moreover, as a priced risk factor, it helps to explain cross‐sectional returns on hedge funds and currency carry trades, both known to be sensitive to the general liquidity conditions of the market.