Showing papers in "Journal of Financial Economics in 2007"

TL;DR: In this article, the authors investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries, and find that both creditor protection through the legal system and information sharing institutions are associated with higher ratios of the private credit to GDP.

TL;DR: Li et al. as discussed by the authors found that firms with politically connected CEOs underperform those without politically connected CEO by almost 18% based on three-year post-IPO stock returns and have poorer 3-year earnings growth, sales growth, and change in returns on sales.

TL;DR: In this article, the authors investigate how corporate governance impacts firm value by comparing the value and use of cash holdings in poorly and well-governed firms, and they show that governance has a substantial impact on value through its impact on cash: $1.42 to $0.88.

TL;DR: In this article, the authors hypothesize that independent institutions with long-term investments specialize in monitoring and influencing efforts rather than trading and show that only concentrated holdings by independent longterm institutions are related to post-merger performance.

TL;DR: The authors found that board size and independence increase as firms grow and diversify over time; board size reflects a tradeoff between the firm-specific benefits and costs of monitoring; and board independence is negatively related to the manager's influence and positively related to constraints on that influence.

TL;DR: The authors developed and tested a model of how country characteristics, such as legal protections for minority investors and the level of economic and financial development, influence firms' costs and benefits in implementing measures to improve their own governance and transparency.

TL;DR: The authors examined institutional price pressure in equity markets by studying mutual fund transactions caused by capital flows from 1980 to 2004 and found that funds experiencing large outflows tend to decrease existing positions, which creates price pressure on the securities held in common by distressed funds.

TL;DR: In this paper, a consumption-based asset pricing model where housing is explicitly modeled both as an asset and as a consumption good is proposed, and the model predicts that the housing share can be used to forecast excess returns on stocks.

TL;DR: In this paper, the authors investigate whether the diversity of activities conducted by financial institutions influences their market valuations and find that there is a diversification discount: the market values of financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, are lower than if those financial aggregates were broken into financial intermediaries that specialize in the individual activities.

TL;DR: The authors investigated whether this is purely an economic-downturn effect or also a fire-sales effect along the lines of Shleifer and Vishny [1992] and found that creditors of defaulted firms recover significantly lower amounts in present-value terms when the industry of a defaulted firm is in distress.

TL;DR: In this paper, the authors provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates.

TL;DR: In this paper, the authors investigate the growth impact of banking crises on industries with different levels of dependence on external finance and find that those sectors that are highly dependent on international finance tend to experience a substantially greater contraction of value added during a banking crisis in countries with deeper financial systems than in countries having shallower financial systems.

TL;DR: The authors investigate the incentives that led to the rash of restated financial statements at the end of the 1990s market bubble and find that the likelihood of a misstated financial statement increases greatly when the CEO has very sizable holdings of in-the-money stock options.

TL;DR: This article found that borrowers with greater information asymmetries are significantly more likely to obtain future loans from relationship lenders than non-relationship lenders, and that relationship lenders are likely to be chosen to provide debt/equity underwriting services.

TL;DR: This article investigated whether the returns of industry portfolios predict stock market movements and found that a significant number of industry returns, including retail, services, commercial real estate, metal, and petroleum, forecast the stock market by up to two months.

TL;DR: This article examined how cash flows, investment expenditures, and stock price histories affect debt ratios and found that these variables have a substantial influence on changes in capital structure, but in contrast to previous conclusions, their effects are partially reversed.

TL;DR: In this article, the authors use news reflected in the stock market as a benchmark for public information, and find significant incremental information revelation in the credit default swap market under circumstances consistent with the use of non-public information by informed banks.

TL;DR: In this article, the authors investigate the functioning of internal capital markets in Indian Business Groups and find that the first bankruptcy in a group is followed by significant drops in external financing, investments and profits of other firms in the group and an increase in their bankruptcy probability.

TL;DR: In this paper, the authors developed and tested the hypothesis that the magnitude of US multinational cash holdings are, in part, a consequence of the tax costs associated with repatriating foreign income, and found that less financially constrained firms and those that are more technology intensive exhibit a higher sensitivity of affiliate cash holdings to repatriation tax burdens.

TL;DR: In this article, the authors examined the intra-industry information transfer effect of credit events, as captured in the credit default swaps (CDS) and stock markets, and found strong evidence of contagion effects for Chapter 11 bankruptcies and competition effects for chapter 7 bankruptcies.

TL;DR: In this paper, the authors analyzed the interaction between corporate taxes and corporate governance and showed that the design of the corporate tax system affects the amount of private benefits extracted by company insiders and that the quality of the Corporate Governance System affects the sensitivity of tax revenues to tax changes.

TL;DR: In this article, a measure of optimism using the Survey of Consumer Finance by comparing self-reported life expectancy to that implied by statistical tables was created, which correlates with positive beliefs about future economic conditions and with psychometric tests of optimism.

TL;DR: This article investigated the reputational impact of financial fraud for outside directors based on a sample of firms facing shareholder class action lawsuits and found that outside directors do not face abnormal turnover on the board of the sued firm but experience a significant decline in other board seats held.

TL;DR: In this article, the authors present evidence on the relation between hedge fund returns and restrictions imposed by funds that limit the liquidity of fund investors, and they find that the excess returns of funds with lockup restrictions are approximately 4-7% per year higher than those of non-lockup funds.

TL;DR: This paper used dynamic factor analysis for large datasets to summarize a large amount of economic information by few estimated factors, and find that three new factors -volatility, risk premium, and real factors - contain important information about one-quarter-ahead excess returns and volatility not contained in commonly used predictor variables.

TL;DR: The authors found that fund families with a larger client base may have adopted voting policies that led to less frequent opposition to management at all firms, and that funds are no more likely to vote with management of client firms than of non-clients.

TL;DR: In this article, a method for maximum likelihood estimation in closed-form stochastic volatility models was developed and implemented using Monte Carlo simulations, where an option price is inverted into the unobservable volatility state, to an approximate likelihood procedure where the volatility state is replaced by proxies based on the implied volatility of a short-dated at-the-money option.

TL;DR: The authors used a robust bootstrap procedure to find that top hedge fund performance cannot be explained by luck, and hedge fund's performance persists at annual horizons, and showed that Bayesian measures, which help overcome the short-sample problem inherent in hedge fund returns, lead to superior performance predictability.

TL;DR: In this paper, the authors show that classified boards destroy value by entrenching management and reducing the effectiveness of board members, and that the observed reduction in value is due to managerial entrenchment and diminished board accountability.

TL;DR: In this article, the authors identify observable firm-specific attributes that drive momentum and use them to implement momentum strategies (buying winners and selling losers) with both numerically simulated returns and CRSP/Compustat data.