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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How Long Do Junk Bonds Spend in Default?
Published: 05/06/2003 | DOI: 10.1111/0022-1082.00107
Jean Helwege
This paper analyzes junk bond defaults during 1980 to 1991 to determine which factors affect the length of time spent in default. Bondholder holdouts are not a significant problem, as firms with proportionately more bonds have shorter default spells. In contrast, bank debt is associated with slower restructurings. Bargaining problems arising from contingent liabilities, lawsuits, and size delay the process, although multiple bond classes do not. Neither information problems nor firm value appear to matter. HLTs do not resolve their defaults at a significantly faster pace. Defaults tend to take less time in the 1990s, despite Drexel's disappearance from the market.
Free Cash Flow, Issuance Costs, and Stock Prices
Published: 09/21/2011 | DOI: 10.1111/j.1540-6261.2011.01680.x
JEAN‐PAUL DÉCAMPS, THOMAS MARIOTTI, JEAN‐CHARLES ROCHET, STÉPHANE VILLENEUVE
We develop a dynamic model of a firm facing agency costs of free cash flow and external financing costs, and derive an explicit solution for the firm's optimal balance sheet dynamics. Financial frictions affect issuance and dividend policies, the value of cash holdings, and the dynamics of stock prices. The model predicts that the marginal value of cash varies negatively with the stock price, and positively with the volatility of the stock price. This yields novel insights on the asymmetric volatility phenomenon, on risk management policies, and on how business cycles and agency costs affect the volatility of stock returns.
DISCUSSION
Published: 06/01/1978 | DOI: 10.1111/j.1540-6261.1978.tb02028.x
Jean Crockett
Trade Credit and Industry Dynamics: Evidence from Trucking Firms
Published: 10/13/2015 | DOI: 10.1111/jofi.12371
JEAN‐NOËL BARROT
Long payment terms are a strong impediment to the entry and survival of liquidity‐constrained firms. To test this idea and its implications, I consider the effect of a reform restricting the trade credit supply of French trucking firms. In a difference‐in‐differences setting, I find that trucking firms' corporate default probability decreases by 25% following the restriction. The effect is persistent, concentrated among liquidity‐constrained firms, and not offset by a decrease in profits. The restriction also triggers an increase in the entry of small trucking firms.
REPLY
Published: 03/01/1969 | DOI: 10.1111/j.1540-6261.1969.tb00348.x
William H. Jean
The Geometric Mean and Stochastic Dominance
Published: 03/01/1980 | DOI: 10.1111/j.1540-6261.1980.tb03477.x
WILLIAM H. JEAN
LAPM: A Liquidity‐Based Asset Pricing Model
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00391
Bengt Holmström, Jean Tirole
The intertemporal CAPM predicts that an asset's price is equal to the expectation of the product of the asset's payoff and a representative consumer's intertemporal marginal rate of substitution. This paper develops an alternative approach to asset pricing based on corporations' desire to hoard liquidity. Our corporate finance approach suggests new determinants of asset prices such as the distribution of wealth within the corporate sector and between the corporate sector and the consumers. Also, leverage ratios, capital adequacy requirements, and the composition of savings affect the corporate demand for liquid assets and, thereby, interest rates.
The Harmonic Mean and Other Necessary Conditions for Stochastic Dominance
Published: 06/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb02325.x
WILLIAM H. JEAN
In this paper a systematic procedure is developed to determine necessary conditions for all degrees of stochastic dominance. The previously known necessary conditions are specified as to which degrees of dominance they belong, and two new necessary conditions, a ranking of harmonic means and a ranking of algebraic combinations of the first three moments, are derived.
ON MULTIPLE RATES OF RETURN
Published: 03/01/1968 | DOI: 10.1111/j.1540-6261.1968.tb03006.x
William H. Jean
The Slope of the Credit Yield Curve for Speculative‐Grade Issuers
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00170
Jean Helwege, Christopher M. Turner
Many theoretical bond pricing models predict that the credit yield curve facing risky bond issuers is downward‐sloping. Previous empirical research (Sarig and Warga (1989), Fons (1994)) supports these models. Our study examines sets of bonds issued by the same firm with equal priority in the liability structure, but with different maturities, thus holding credit quality constant. We find, counter to prior research, that risky bonds typically have upward‐sloping credit yield curves. Moreover, when we combine our matched sets of bonds (no longer controlling credit quality), the estimated slope is negative, indicating a sample selection bias problem associated with maturity.
Financial Transaction Taxes, Market Composition, and Liquidity
Published: 04/06/2017 | DOI: 10.1111/jofi.12510
JEAN‐EDOUARD COLLIARD, PETER HOFFMANN
We use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on its impact. We find no support for the idea that an FTT improves market quality by affecting the composition of trading volume. Instead, our results are in line with the hypothesis that a lower trading volume reduces liquidity and in turn market quality. Consistent with theories of asset pricing under transaction costs, we document a shift in security holdings from short‐term to long‐term investors. Finally, we find that moderate aggregate effects on market quality can mask large adjustments made by individual agents.
The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform
Published: 06/02/2020 | DOI: 10.1111/jofi.12955
JEAN‐NOËL BARROT, RAMANA NANDA
We study the impact of Quickpay, a reform that permanently accelerated payments to small business contractors of the U.S. government. We find a strong direct effect of the reform on employment growth at the firm level. However, we document substantial crowding out of nontreated firms' employment within local labor markets. While the overall net employment effect is positive, it is close to zero in tight labor markets. Our results highlight an important channel for alleviating financing constraints in small firms, but emphasize the general‐equilibrium effects of large‐scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.
The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00044
Narjess Boubakri, Jean‐Claude Cosset
This paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992. We use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures. Both unadjusted and market‐adjusted results show significant increases in profitability, operating efficiency, capital investment spending, output, employment level, and dividends. We also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios. Our results are generally robust when we partition our data into various subsamples.
Arbitrage With Holding Costs: A Utility‐Based Approach
Published: 09/01/1992 | DOI: 10.1111/j.1540-6261.1992.tb04658.x
BRUCE TUCKMAN, JEAN‐LUC VILA
Unit time costs, or holding costs, are incurred in many arbitrage contexts. Examples include losing the use of short sale proceeds and lending funds at below market rates in reverse repurchase agreements. This paper analyzes the investment problem of a risk averse arbitrageur who faces holding costs. The model allows prices to deviate from “fundamental” values without allowing for riskless arbitrage opportunities. After characterizing an arbitrageur's optimal strategy, the model is examined in the context of the Treasury market. The analysis reveals that holding costs are an important friction in this market and that they can significantly affect arbitrageur behavior.
Optimal Bank Reorganization Policies and the Pricing of Federal Deposit Insurance
Published: 12/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02655.x
SANKARSHAN ACHARYA, JEAN‐FRANCOIS DREYFUS
Optimal dynamic regulatory policies for closing ailing banks and for deposit insurance premia are derived as functions of the rate of flow of bank deposits, and interest rate on deposits, the economy's risk‐free interest rate, and the regulators' bank audit/administration costs. Under competitive conditions, the threshold assets‐to‐deposits ratio below which a bank should be optimally closed is shown to be greater than or equal to one. Optimal deposit insurance premia and probabilities of bank closure are shown to be nondecreasing in the bank's risk on investment and nonincreasing in the bank's current assets‐to‐deposits ratio.
Liquidation Value and Loan Pricing
Published: 11/03/2023 | DOI: 10.1111/jofi.13291
FRANCESCA BARBIERO, GLENN SCHEPENS, JEAN‐DAVID SIGAUX
This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction‐level data on short‐term repurchase agreements (repo), we show that borrowers pay a premium of 1.1 to 2.6 basis points when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan‐level credit registry data suggest that the results extend to the corporate loan market as well.
The Globalization Risk Premium
Published: 04/18/2019 | DOI: 10.1111/jofi.12780
JEAN‐NOËL BARROT, ERIK LOUALICHE, JULIEN SAUVAGNAT
In this paper, we investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 7% risk premium, suggesting that their cash flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.