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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Financial Structure, Acquisition Opportunities, and Firm Locations
Published: 03/19/2010 | DOI: 10.1111/j.1540-6261.2009.01543.x
ANDRES ALMAZAN, ADOLFO DE MOTTA, SHERIDAN TITMAN, VAHAP UYSAL
This paper investigates the relation between firms' locations and their corporate finance decisions. We develop a model where being located within an industry cluster increases opportunities to make acquisitions, and to facilitate those acquisitions, firms within clusters maintain more financial slack. Consistent with our model we find that firms located within industry clusters make more acquisitions, and have lower debt ratios and larger cash balances than their industry peers located outside clusters. We also document that firms in high‐tech cities and growing cities maintain more financial slack. Overall, the evidence suggests that growth opportunities influence firms' financial decisions.
Managerial Incentives and Internal Capital Markets
Published: 05/06/2003 | DOI: 10.1111/1540-6261.00563
Capital budgeting in multidivisional firms depends on the external assessment of the whole firm, as well as on headquarters' assessment of the divisions. While corporate headquarters may create value by directly monitoring divisions, the external assessment of the firm is a public good for division managers who, consequently, are tempted to free ride. As the number of divisions increases, the free‐rider problem is aggravated, and internal capital markets substitute for external capital markets in the provision of managerial incentives. The analysis relates the value of diversification to characteristics of the firm, the industry, and the capital market.
Attracting Attention: Cheap Managerial Talk and Costly Market Monitoring
Published: 05/09/2008 | DOI: 10.1111/j.1540-6261.2008.01361.x
ANDRES ALMAZAN, SANJAY BANERJI, ADOLFO DE MOTTA
We provide a theory of informal communication—cheap talk—between firms and capital markets that incorporates the role of agency conflicts between managers and shareholders. The analysis suggests that a policy of discretionary disclosure that encourages managers to attract the market's attention when the firm is substantially undervalued can create shareholder value. The theory also relates the credibility of managerial announcements to the use of stock‐based compensation, the presence of informed trading, and the liquidity of the stock. Our results are consistent with the existence of positive announcement effects produced by apparently innocuous corporate events (e.g., stock dividends, name changes).
Transparency in the Financial System: Rollover Risk and Crises
Published: 03/18/2015 | DOI: 10.1111/jofi.12270
MATTHIEU BOUVARD, PIERRE CHAIGNEAU, ADOLFO DE MOTTA
We present a theory of optimal transparency when banks are exposed to rollover risk. Disclosing bank‐specific information enhances the stability of the financial system during crises, but has a destabilizing effect in normal economic times. Thus, the regulator optimally increases transparency during crises. Under this policy, however, information disclosure signals a deterioration of economic fundamentals, which gives the regulator ex post incentives to withhold information. This commitment problem precludes a disclosure policy that provides ex ante optimal insurance against aggregate shocks, and can result in excess opacity that increases the likelihood of a systemic crisis.