Showing papers in "Journal of Financial Economics in 2005"

TL;DR: Li et al. as mentioned in this paper showed that the private sector grows much faster than the other three sectors and provides most of the economy's growth, while the law-finance growth nexus applies to the State Sector and the Listed Sector, with arguably poorer applicable legal and financial mechanisms.

TL;DR: In this paper, a simple equilibrium model with liquidity risk is proposed, where a security's required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return.

TL;DR: The authors survey 384 financial executives and conduct in depth interviews with an additional 23 to determine the factors that drive dividend and share repurchase decisions, finding that maintaining the dividend level is on par with investment decisions while repurchases are made out of the residual cash flow after investment spending.

TL;DR: This article found that economic, regulatory and technological shocks drive industry merger waves, however, whether the shock leads to a wave of mergers depends on whether there is sufficient overall capital liquidity.

TL;DR: This paper showed that equity market liberalization, on average, leads to a 1% increase in annual real economic growth and that the largest growth response occurs in countries with high-quality institutions.

TL;DR: This article found evidence consistent with small banks being better able to collect and act on soft information than large banks, and that large banks are less willing to lend to informationally "difficult" credits, such as firms with no financial records.

TL;DR: This article showed that government-owned banks increase their lending in election years relative to private banks in countries other than the United States, and that this effect is robust to controlling for country-specific macroeconomic and institutional factors as well as bank-specific factors.

TL;DR: This article found that short-sale constraints are most likely to bind among stocks with low institutional ownership, and that stock loan supply tends to be sparse and short selling more expensive when institutional ownership is low.

TL;DR: In this paper, the authors present new indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities, and explore the association between the outreach indicators and measures of financial, institutional, and infrastructure development across countries, and relate these banking outreach indicators to measures of firms' financing constraints.

TL;DR: In this article, a decomposition of the market-to-book ratio (M/B ) was developed to test recent theories suggesting that valuation errors affect merger activity, and they found strong support for recent theories by Rhodes-Kropf and Viswanathan.

TL;DR: In this article, the impact of legal origin and political institutions on liquidity levels in emerging markets has been examined, and it was shown that countries with weak political and legal institutions have significantly higher liquidity costs than do countries with strong legal and legal systems.

TL;DR: In this paper, the authors investigate empirically how the value of publicly traded firms is overall affected by arrangements protecting management from removal, and they find that staggered boards are associated with a lower firm value (as measured by Tobin's Q).

TL;DR: In this paper, the authors investigate how the investment horizon of a firm's institutional shareholders impacts the market for corporate control and find that target firms with short-term shareholders are more likely to receive an acquisition bid but get lower premiums.

TL;DR: Acemoglu et al. as mentioned in this paper found that expropriation risk and contract enforcement play a role in Chinese firms' reinvestment decisions, while the extent of private ownership is associated with greater private ownership.

TL;DR: In this paper, a new estimator that forecasts monthly variance with past daily squared returns is introduced, the Mixed Data Sampling (or MIDAS) approach, which finds that there is a significantly positive relation between risk and return in the stock market.

TL;DR: The authors measured the mean, standard deviation, alpha, and beta of venture capital investments, using a maximum likelihood estimate that corrects for selection bias, and found that the bias-corrected estimation neatly accounts for log returns.

TL;DR: This paper found that constrained stocks underperform during the period 1988-2002 by a significant 215 basis points per month on an equally weighted basis, although by only an insignificant 39 basis points on a valueweighted basis.

TL;DR: In this article, the authors show that the year-by-year equity decisions of more than half of the sample firms violate the pecking order model and that most firms issue or retire equity each year and the issues are on average large and not typically done by firms under duress.

TL;DR: The tendency of some investors to hold on to their losing stocks, driven by prospect theory and mental accounting, creates a spread between a stock's fundamental value and its equilibrium price, as well as price underreaction to information.

TL;DR: In this paper, the authors catalog the complete contents of Institutional Investor All-American analyst reports and examine the market reaction to their release, including the justifications supporting an analyst's opinion reduces, and in some models eliminates, the significance of earnings forecasts and recommendation revisions.

TL;DR: The functional convergence hypothesis as discussed by the authors states that foreign firms can leapfrog their countries’ weak legal institutions by listing equities in New York and agreeing to follow U.S. securities law.

TL;DR: In this paper, the relative risk of value and growth stocks is studied and the authors find that time-varying risk goes in the right direction in explaining the value premium.

TL;DR: In this paper, the authors studied the effect of financial crises on trade credit for a sample of 890 firms in six emerging economies and argued that the decline in aggregate trade credit ratios is driven by the reduction in the supply of trade credit that follows a bank credit crunch.

TL;DR: In this paper, the authors consider three potential economic justifications for stock option grants: providing incentives to employees, inducing employees to sort, and employee retention, and conclude that sorting and retention explanations appear consistent with the data.

TL;DR: In this paper, the authors investigate the evolution of liquidity in an electronic limit order market and find that informed traders use more limit orders than do liquidity traders, and the change in the behavior of the informed traders seems to be in response to the dynamic adjustment of prices to information; they take liquidity when the value of their information is high (low).

TL;DR: In this article, the authors examined the effect of credit rating changes on stock prices and found that the informational effect of downgrades and upgrades is much greater in the post-FD period.

TL;DR: In this article, the authors investigate the nature of trading discipline and whether professional traders are able to avoid the costly irrational behaviors found in retail populations, and find no evidence of costs associated with this behavior.

TL;DR: In this paper, the authors examine the wealth effects of horizontal takeovers on rivals of the merging firms, and on firms in the takeover industry's supplier and customer industries, and find significant positive abnormal returns to rivals, suppliers, and corporate customers for the subsample of takeovers with positive combined wealth effect to target and bidder shareholders.

TL;DR: The authors studied the effect of a sovereign credit rating change of one country on the sovereign credit spreads of other countries from 1991 to 2000 and found evidence of spillover effects; that is, a ratings change in one country has a significant effect on sovereign credit spread of other country.

TL;DR: In this article, the authors examine interactions between flexible financing and investment decisions in a model with stockholder-bondholder conflicts over investment policy, and find that financial flexibility encourages the choice of short-term debt thereby dramatically reducing the agency costs of under- and overinvestment.