Showing papers in "Journal of Financial Economics in 2003"

TL;DR: In this paper, the authors examine systematic differences in earnings management across 31 countries and propose an explanation for these differences based on the notion that insiders, in an attempt to protect their private control benefits, use earnings management to conceal firm performance from outsiders.

TL;DR: In this paper, the authors propose an interest group theory of financial development where incumbents oppose financial development because it breeds competition. And the theory predicts that incumbents’ opposition will be weaker when an economy allows both cross-border trade and capital flows.

TL;DR: In this paper, the authors test the pecking order theory of corporate leverage on a broad cross-section of publicly traded American firms for 1971 to 1998 and find that net equity issues track the financing deficit more closely than do net debt issues.

TL;DR: In this article, the authors present a model of mergers and acquisitions based on stock market misvaluations of the combining firms and the market's perception of the synergies from the combination.

TL;DR: In this paper, the authors investigate the impact of the founding family ownership structure on the agency cost of debt and find that it is common in large publicly traded firms and is related to a lower cost for debt financing.

TL;DR: The authors show that a country's principal religion predicts the cross-sectional variation in creditor rights better than its natural openness to international trade, its language, its income per capita, or the origin of its legal system.

TL;DR: The onset of the Asian financial crisis in Malaysia reduced the expected value of government subsidies to politically connected firms, accounting for roughly 9% of the estimated $60 billion loss in their market value from July 1997 to August 1998.

TL;DR: In this article, the authors measure the value of corporate voting rights, specifically of the control block of votes, in a sample of 661 dual-class firms in 18 countries, in 1997.

TL;DR: In this paper, the performance changes of 634 state-owned enterprises (SOEs) listed on China's two exchanges upon share issuing privatisation (SIP) in the period 1994-1998 were evaluated.

TL;DR: Lee et al. as discussed by the authors examined how ownership structure and conflicts of interest among shareholders under a poor corporate governance system affected firm performance before the crisis and found that firms with low ownership concentration show low firm profitability, controlling for firm and industry characteristics.

TL;DR: In this paper, the authors investigate whether institutional investors vote with their feet when dissatisfied with a firm's management by examining changes in equity ownership around forced CEO turnover and find that aggregate institutional ownership and the number of institutional investors decline in the year prior to forcing CEO turnover.

TL;DR: In this paper, two theories regarding the historical determinants of financial development are assessed using a sample of 70 former colonies, and the empirical results provide evidence for both theories. But, initial endowments explain more of the cross-country variation in financial intermediary and stock market development.

TL;DR: In this paper, the authors provide evidence of how macroeconomic conditions affect capital structure choice, showing that unconstrained firms time their issue choice to coincide with periods of favorable macro economic conditions, while constrained firms do not.

TL;DR: This article examined monthly returns following public news and compared them to stocks with similar returns, but no identifiable public news, finding strong drift after bad news and reversal after extreme price movements unaccompanied by public news.

TL;DR: In this article, the authors examined the choice among bank debt, non-bank private debt, and public debt for new debt financings and found that the primary determinant of the debt source is the credit quality of the issuer.

TL;DR: In this article, the authors provide evidence on the effects of including a target termination fee in a merger contract and test the implications of the hypothesis that termination fees are used by self-interested target managers to deter competing bids and protect "sweetheart" deals with white knight bidders, presumably resulting in lower premiums for target shareholders.

TL;DR: This article developed a theory of stock-based compensation contracts for the chief executive officers (CEOs) of firms and confronted the theoretical predictions with recent CEO compensation data, and showed a positive and economically meaningful relationship between stockbased pay-sensitivities and CEO reputation.

TL;DR: In this paper, a model that includes a factor that captures news related to future Gross Domestic Product (GDP) growth along with the market factor can explain the cross-section of equity returns about as well as the Fama-French model can.

TL;DR: This article used asymptotic arguments to show that the t-statistics in long-horizon regressions do not converge to well-defined distributions and that the ordinary least squares estimator is not consistent and the R2 is an inadequate measure of the goodness of fit.

TL;DR: In this paper, the authors measure the economic value of switching from daily to intradaily returns to estimate the conditional covariance matrix can be substantial, and they estimate that a risk-averse investor would be willing to pay 50 to 200 basis points per year to capture the observed gains in portfolio performance.

TL;DR: In this paper, the authors provide evidence of a causal and economically important effect of financial development on volatility and find that sectors with larger liquidity needs are more volatile and experience deeper crises in financially underdeveloped countries.

TL;DR: In this paper, the authors report the magnitude of their risk exposure hedged by financial derivatives and find that corporate derivatives use appears to be a small piece of non-financial firms' overall risk profile, which suggests a need to rethink past empirical research documenting the importance of firms' derivative use.

TL;DR: In this paper, the authors compared the extent to which aggregate capital demands of private firms, adverse-selection costs of issuing equity, and the level of investor optimism can explain these fluctuations.

TL;DR: In this paper, an approximate solution method for the optimal consumption and portfolio choice problem of an infinitely long-lived investor with Epstein-Zin utility was developed for a set of asset returns described by a vector autoregression in returns and state variables.

TL;DR: In this paper, the authors examined the relation between the institutional structures of advanced OECD countries and the comparative growth and investment of 27 industries in those countries over the period 1970 to 1995.

TL;DR: The authors showed that the book-to-market (B/M) effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs and lower investor sophistication, consistent with the market-mispricing explanation for the anomaly.

TL;DR: In this article, the authors investigate the nature of the incentives that lead outside directors to serve stockholders' interests and document the effect of a takeover bid on target directors, both in terms of its immediate financial impact and its effect on the number of future board seats held by those target directors.

TL;DR: In this article, a first attempt to study how the structure of the industry affects mutual fund behavior is made, and it is shown that the mutual fund families employ strategies that rely on the heterogeneity of the investors in terms of investment horizon by offering the possibility to switch across different funds belonging to the same family at no cost.

TL;DR: In this article, the authors consider 200 alliance agreements entered into by biotechnology firms between 1980 and 1995 and find that agreements signed during periods of limited external equity financing are more likely to assign the bulk of the control to the larger corporate partner, and are significantly less successful than other alliances.

TL;DR: In this article, the authors propose a framework for corporate security valuation based on path-dependent, barrier option models instead of the commonly used path-independent approach, and apply the barrier option framework to bankruptcy prediction.