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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The Wealth Effects of Bank Financing Announcements in Highly Leveraged Transactions
Published: 12/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb05232.x
WILLIAM A. KRACAW, MARC ZENNER
We analyze the effect of financing announcements of highly leveraged transactions (HLTs) on the stock prices of the banks that lead HLT‐lending syndicates. For our sample of 41 HLTs, we document that the first HLT and bank financing announcements result in positive wealth effects for the lending banks. We also find that these wealth effects are lower in 1985, for smaller HLTs, and for banks with a high loan loss reserve to total asset ratio. Finally, we report that Leveraged Buyout (LBO) targets gain about 2 percent, whereas leveraged recap targets lose about 2 percent, when the first bank financing agreement is announced.
The Reversal of Large Stock‐Price Decreases
Published: 06/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb02684.x
MARC BREMER, RICHARD J. SWEENEY
Extremely large negative 10‐day rates of return are followed on average by larger‐than‐expected positive rates of return over following days. This price adjustment lasts approximately 2 days and is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon. While perhaps not representing abnormal profit opportunities, these reversals present a puzzle as to the length of the price adjustment period. Such a slow recovery is inconsistent with the notion that market prices quickly reflect relevant information.
Forward and Futures Prices: Evidence from the Foreign Exchange Markets
Published: 12/01/1981 | DOI: 10.1111/j.1540-6261.1981.tb01074.x
BRADFORD CORNELL, MARC R. REINGANUM
Empirical studies of the Treasury Bill markets have revealed substantial differences between the futures price and the implied forward price. These differences have been attributed to taxes, transaction costs, and the settling up procedure employed in the futures market. This paper examines the forward and futures prices in foreign exchange in an attempt to distinguish between the competing explanations.
Making Sense of Cents: An Examination of Firms That Marginally Miss or Beat Analyst Forecasts
Published: 09/28/2009 | DOI: 10.1111/j.1540-6261.2009.01503.x
SANJEEV BHOJRAJ, PAUL HRIBAR, MARC PICCONI, JOHN McINNIS
This paper examines the performance consequences of cutting discretionary expenditures and managing accruals to exceed analyst forecasts. We show that firms that just beat analyst forecasts with low quality earnings exhibit a short‐term stock price benefit relative to firms that miss forecasts with high quality earnings. This trend, however, reverses over a 3‐year horizon. Additionally, firms reducing discretionary expenditures to beat forecasts have significantly greater equity issuances and insider selling in the following year, consistent with managers understanding the myopic nature of their actions. Our results confirm survey evidence suggesting managers engage in myopic behavior to beat benchmarks.
Insider Trading, News Releases, and Ownership Concentration
Published: 01/11/2007 | DOI: 10.1111/j.1540-6261.2006.01008.x
JANA P. FIDRMUC, MARC GOERGEN, LUC RENNEBOOG
This paper investigates the market's reaction to U.K. insider transactions and analyzes whether the reaction depends on the firm's ownership. We present three major findings. First, differences in regulation between the U.K. and United States, in particular the speedier reporting of trades in the U.K., may explain the observed larger abnormal returns in the U.K. Second, ownership by directors and outside shareholders has an impact on the abnormal returns. Third, it is important to adjust for news released before directors' trades. In particular, trades preceded by news on mergers and acquisitions and CEO replacements contain significantly less information.
Order Flow and Liquidity around NYSE Trading Halts
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00267
Shane A. Corwin, Marc L. Lipson
We study order flow and liquidity around NYSE trading halts. We find that market and limit order submissions and cancellations increase significantly during trading halts, that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt, and that the market‐clearing price at the reopen is a good predictor of future prices. Depth near the quotes is unusually low around trading halts, though specialists and/or floor traders appear to provide additional liquidity at these times. Finally, specialists appear to “spread the quote” prior to imbalance halts to convey information to market participants.
THE EFFECTIVENESS OF CANADIAN FISCAL POLICY
Published: 12/01/1952 | DOI: 10.1111/j.1540-6261.1952.tb02483.x
Edward Marcus
THE OUTLOOK FOR MONEY RATES*
Published: 05/01/1956 | DOI: 10.1111/j.1540-6261.1956.tb00703.x
Marcus Nadler
DISCUSSION
Published: 05/01/1971 | DOI: 10.1111/j.1540-6261.1971.tb00909.x
Marcus Alexis
Spinoff/Terminations and the Value of Pension Insurance
Published: 07/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb05018.x
ALAN J. MARCUS
This paper derives the value of Pension Benefit Guarantee Corporation (PBGC) pension insurance under two scenarios of interest. The first allows for voluntary plan termination, which appears to be legal under current statutes. In the second scenario, termination is prohibited unless the firm is bankrupt. Empirical estimates of PBGC liabilities are calculated. These show that prospective PBGC liabilities greatly exceed current reserves for plan terminations, that even under a bankruptcy‐only termination rule, PBGC liabilities still would be quite sensitive to discretionary funding policy, and that the increasingly common practice of pension spinoff/terminations, substantially increases the present value of the PBGC's contingent liabilities.
The Development of Secondary Market Liquidity for NYSE‐Listed IPOs
Published: 11/27/2005 | DOI: 10.1111/j.1540-6261.2004.00701.x
SHANE A. CORWIN, JEFFREY H. HARRIS, MARC L. LIPSON
For NYSE‐listed IPOs, limit order submissions and depth relative to volume are unusually low on the first trading day. Initial buy‐side liquidity is higher for IPOs with high‐quality underwriters, large syndicates, low insider sales, and high premarket demand, while sell‐side liquidity is higher for IPOs that represent a large fraction of outstanding shares and have low premarket demand. Our results suggest that uncertainty and offer design affect initial liquidity, though order flow stabilizes quickly. We also find that submission strategies are influenced by expected underwriter stabilization and preopening order flow contains information about both initial prices and subsequent returns.
The Bank Capital Decision: A Time Series—Cross Section Analysis
Published: 09/01/1983 | DOI: 10.1111/j.1540-6261.1983.tb02292.x
ALAN J. MARCUS
This paper seeks to explain the dramatic decline in capital to asset ratios in U.S. commercial banks during the last two decades. It is hypothesized that the rise in nominal interest rates during this period might have contributed substantially to the fall in capital ratios. Time series‐cross section estimation supports the hypothesis regarding the interest rate.
The Economics of Deferral and Clawback Requirements
Published: 05/28/2022 | DOI: 10.1111/jofi.13160
FLORIAN HOFFMANN, ROMAN INDERST, MARCUS OPP
We analyze the effects of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements restricting incentive compensation of material risk‐takers in the financial sector. Moderate deferral requirements have a robustly positive effect on risk‐management effort only if the bank manager's outside option is sufficiently high; otherwise, their effectiveness depends on the dynamics of information arrival. Stringent deferral requirements unambiguously backfire. Our normative analysis characterizes whether and how deferral and clawback requirements should supplement capital regulation as part of the optimal policy mix.
Earnings and Dividend Announcements: Is There a Corroboration Effect?
Published: 09/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb03894.x
ALEX KANE, YOUNG KI LEE, ALAN MARCUS
We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other. We find that there is a statistically significant interaction effect. The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.
Tracing the International Transmission of a Crisis through Multinational Firms
Published: 04/08/2024 | DOI: 10.1111/jofi.13338
MARCUS BIERMANN, KILIAN HUBER
We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were “Darwinist” with respect to international affiliates but “Socialist” in the home country, that internal capital markets transmitted the credit shock more strongly than a nonfinancial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.