Showing papers in "Journal of Financial Economics in 2006"

TL;DR: The authors found that the classic owner-manager conflict in non-family firms is more costly than the conflict between family and nonfamily shareholders in founder-CEO firms, and that the conflicts between family shareholders in descendant- CEO firms are more costly.

TL;DR: This paper found that higher sensitivity of CEO wealth to stock volatility (vega) implements riskier policy choices, including relatively more investment in R&D, less investment in PPE, more focus, and higher leverage.

TL;DR: This article found that the use of discretionary accruals to manipulate reported earnings is more pronounced at firms where the CEO's potential total compensation is more closely tied to the value of stock and option holdings.

TL;DR: In this paper, the authors study the effect of market entry regulations on the creation of new limited-liability firms, the average size of entrants, and the growth of incumbent firms.

TL;DR: This article showed that lack of transparency increases R2 by shifting firm-specific risk to managers and that opaque stocks with high R2s are also more likely to crash, that is, to deliver large negative returns.

TL;DR: A more general, partial-adjustment model of firm leverage indicates that firms do have target capital structures as mentioned in this paper, and the typical firm closes about one-third of the gap between its actual and its target debt ratios each year.

TL;DR: In this paper, the authors observed a highly significant relation between the decision to pay dividends and the earned/contributed capital mix, controlling for profitability, growth, firm size, total equity, cash balances, and dividend history, a relation that also holds for dividend initiations and omissions.

TL;DR: In this paper, the authors analyzed the link between corporate tax avoidance and the growth of high-powered incentives for managers and found that increases in incentive compensation tend to reduce the level of tax sheltering, in a manner consistent with a complementary relationship between diversion and sheltering.

TL;DR: In this paper, the authors examined the effect of CEO compensation contracts on misreporting and found that the sensitivity of the option portfolio to stock price is significantly positively related to the propensity to misreport.

TL;DR: In this paper, the authors predict that more profitable firms have higher expected returns, as do firms with higher book-to-market equity ratio (Bt/Mt), expected profitability, and expected investment.

TL;DR: Using a new measure of liquidity, the authors documents a significant liquidity premium robust to the CAPM and the Fama-French three-factor model and shows that liquidity is an important source of priced risk.

TL;DR: The authors show that limited investor attention leads to category-learning behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information, which generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models.

TL;DR: This article developed a pretest to determine whether the conventional t-test leads to invalid inference and an efficient test of predictability that corrects this problem, finding evidence for predictability with the short rate and the long-short yield spread.

TL;DR: In this paper, the authors investigated the components of liquidity risk that are important for understanding asset-pricing anomalies and found that a substantial part of momentum and post-earnings-announcement drift (PEAD) returns can be viewed as compensation for the unexpected variations in the aggregate ratio of informed traders to noise traders.

TL;DR: In this paper, a simple test of the conditional CAPM using direct estimates of conditional alphas and betas from short-window regressions, avoiding the need to specify conditioning information was provided.

TL;DR: In this paper, the authors examine a sample of connected transactions between Hong Kong listed companies and their controlling shareholders and find limited evidence that firms undertaking connected transactions trade at discounted valuations prior to the expropriation.

TL;DR: In this paper, the role of political connections in firms' financing strategies and their long-run performance is examined, showing that firms with strong political connections are less likely to have publicly traded foreign securities.

TL;DR: In this article, the authors develop a framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice and demonstrate that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and financing policies to the position of the economy in the business cycle phase.

TL;DR: In this article, the authors examined the relation between the stock price synchronicity and analyst activity in emerging markets and found that securities which are covered by more analysts incorporate greater (lesser) market-wide (firm-specific) information.

TL;DR: In this paper, the authors identify two variance components embedded in the returns constructed using high frequency asset prices: the time-varying variance of the unobservable efficient returns that would prevail in a frictionless economy and the variance of variance of noise.

TL;DR: For example, this article found that the average executive loses 25-45% less pay from bad luck than is gained from good luck when the stock market is down than when it is up.

TL;DR: In this paper, the authors gather a unique sample of 44 tax shelter cases to investigate the magnitude of tax shelter activity and whether participating in a shelter is related to corporate debt policy.

TL;DR: In this article, a consumption-based model is proposed to account for many features of the nominal term structure of interest rates, and the driving force behind the model is a time-varying price of risk generated by external habit.

TL;DR: In this article, the authors examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns, positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position.

TL;DR: In this article, the authors investigated the factors that determine the use of collateral in time series and cross-section data on the population of banks and found that a higher risk free interest rate of the economy and a smaller size of the loan increase the likelihood that a loan will be totally secured with collateral instead of partially secured.

TL;DR: This article developed a simple model of the effect of public transaction reporting on trade execution costs and test it using a sample of institutional trades in corporate bonds, before and after initiation of the TRACE reporting system.

TL;DR: The authors empirically examined the within-industry relation between leverage and sales performance using data from 115 industries over 30 years and found that moderate debt taking is associated with relative-to-rival sales gains; high indebtedness, however, leads to product market underperformance.

TL;DR: In this paper, the authors examine market behavior around earnings announcements to understand the consequences of increased disclosure that non-U.S. firms face when listing shares in the U.S., and find that absolute return and volume reactions to earnings announcements typically increase significantly once a company cross-lists in the USA.

TL;DR: In this paper, the role of interfirm alliances as a mechanism for sharing technological knowledge was explored and it was shown that knowledge flows between alliance partners will be greater than flows between pairs of nonallied firms, and less than flows within units within single firms.

TL;DR: In this paper, the authors find that analysts who issue more accurate earnings forecasts also issue more profitable stock recommendations, and that the average factor-adjusted return associated with the recommendations of analysts in the highest accuracy quintile exceeds the corresponding return for analysts of the lowest accuracy five quintile by 1.27% per month.