Showing papers in "Journal of Financial Economics in 2011"

TL;DR: In this article, the authors evaluated the importance of financial literacy by studying its relation to the stock market: are more financially knowledgeable individuals more likely to hold stocks? To assess the direction of causality, they make use of questions measuring financial knowledge before investing in the stock markets.

TL;DR: This paper analyzed the relationship between employee satisfaction and long-run stock returns and found that employee satisfaction is positively correlated with shareholders' returns and need not represent managerial slack, even when independently verified by a highly public survey on large firms.

TL;DR: In this article, the authors examined whether institutional investors affect corporate governance by analyzing portfolio holdings of institutions in companies from 23 countries during the period 2003-2008 and found that firm-level governance is positively associated with international institutional investment.

TL;DR: In this article, a large sample of U.S. firms for the period 1995-2008 was used to show that corporate tax avoidance is positively associated with stock price crash risk.

TL;DR: In this paper, it is shown that it is easy to calculate standard errors that are robust to simultaneous correlation along two dimensions, such as firms and time, and any statistical package with a clustering command can be used to easily calculate these standard errors.

TL;DR: In this paper, the authors investigate the significance of extreme positive returns in the cross-sectional pricing of stocks and find a negative and significant relation between the maximum daily return over the past one month (MAX) and expected stock returns.

TL;DR: This paper investigated whether bank performance during the recent credit crisis is related to chief executive officer (CEO) incentives before the crisis and found some evidence that banks with CEOs whose incentives were better aligned with the interests of shareholders performed worse and no evidence that they performed better.

TL;DR: This paper showed that banks that relied more heavily on core deposit and equity capital financing, which are stable sources of financing, continued to lend relative to other banks, and held more illiquid assets on their balance sheets, increased asset liquidity and reduced lending.

TL;DR: In this article, the authors used a large sample of U.S. firms for the period 1993-2009 and found that the sensitivity of a chief financial officer's (CFO) option portfolio value to stock price is significantly and positively related to the firm's future stock price crash risk.

TL;DR: In this article, the authors investigate the relation between the CEO Pay Slice (CPS) and the value, performance, and behavior of public firms and find that, controlling for all standard controls, CPS is negatively associated with firm value as measured by industry-adjusted Tobin's q.

TL;DR: In the G7 countries, the short-horizon performance of aggregate return predictors such as the dividend yield and the short rate appears non-existent during business cycle expansions but sizable during contractions as mentioned in this paper.

TL;DR: The authors show that optimism can lead a risk-averse chief executive to choose the first-best investment level that maximizes shareholders' value, and they find strong empirical support for this prediction.

TL;DR: The authors found that increased competition from Fitch coincides with lower quality ratings from the incumbents: rating levels went up, the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated.

TL;DR: In this article, the authors proposed an optimal combination of the naive 1/N rule with one of the four sophisticated strategies (the Markowitz rule, the Jorion (1986), the MacKinlay and Pastor (2000), and the Kan and Zhou (2007) rule) as a way to improve performance.

TL;DR: This article found that the stock market's expected excess return is positively related to the market's conditional variance in low-sentiment periods but unrelated to variance in high-sentimental periods.

TL;DR: In this article, the authors identify an important channel through which excess control rights affect firm value and find that the cost of debt financing is significantly higher for companies with a wider divergence between the largest ultimate owner's control rights and cash-flow rights.

TL;DR: In this paper, the authors proposed that stronger creditor rights in bankruptcy affect corporate investment choice by reducing corporate risk-taking, and they found that strong creditor rights induce greater propensity of firms to engage in diversifying acquisitions that are value-reducing, to acquire targets whose assets have high recovery value in default, and to lower cash-flow risk.

TL;DR: In this paper, the authors investigated whether geographic variation in religion-induced gambling norms affects aggregate market outcomes and found that gambling propensity would be stronger in regions with higher concentrations of Catholics relative to Protestants.

TL;DR: In this article, the authors examined the broader effects of the U.S. financial crisis on global lending to retail customers and found evidence of a supply side effect in that the affected banks reject substantially more loan applications than non-affected banks.

TL;DR: In this article, the authors provide causal evidence that adverse capital shocks to banks affect their borrowers' performance negatively and suggest that the global integration of the financial sector can contribute to the propagation of financial shocks from one economy to another through the banking channel.

TL;DR: In this paper, the effects of the intensity of board monitoring on directors' effectiveness in performing their monitoring and advising duties were studied, and they found that boards with boards that monitor intensely exhibit worse acquisition performance and diminished corporate innovation.

TL;DR: In this article, the authors studied the pricing of liquidity risk in the cross section of corporate bonds for the period from January 1994 to March 2009 and found that the average return on bonds with high sensitivities to aggregate liquidity exceeds that for bonds with low sensitivities by about 4% annually.

TL;DR: Turnover has been associated with more frequent smaller trades, which have progressively formed a larger fraction of trading volume over time as discussed by the authors, suggesting professional investing as a key contributor to the turnover trend.

TL;DR: The authors examined how fragmentation is affecting market quality in US equity markets and found that more fragmented stocks have lower transactions costs and faster execution speeds; and fragmentation is associated with higher short-term volatility but greater market efficiency, in that prices are closer to being a random walk.

TL;DR: The authors empirically tested the liquidity-adjusted capital asset pricing model of Acharya and Pedersen (2005) on a global level and found evidence that liquidity risks are priced independently of market risk in international financial markets.

TL;DR: In this paper, a sum-of-the-parts (SOP) method was proposed to forecast the three components of stock market returns, namely, the price-earnings ratio, the dividend-price ratio, and the earnings growth.

TL;DR: This paper found that the offering prices of 64 issues of a popular retail structured equity product were, on average, almost 8% greater than estimates of the products' fair market values obtained using option pricing methods.

TL;DR: In this article, the authors investigate the stakeholder theory of capital structure from the perspective of a firm's relations with its employees and find that firms that treat their employees fairly (as measured by high employee friendly ratings) maintain low debt ratios.

TL;DR: The authors estimate a dynamic capital structure model with these features and find that it replicates industry leverage very well, explains debt issuances/repayments better than extant tradeoff models, and accounts for the leverage changes accompanying investment spikes.

TL;DR: In this paper, the authors investigate fire sales of downgraded corporate bonds induced by regulatory constraints imposed on insurance companies and find that these price effects appear larger during periods when the insurance industry is relatively distressed and other potential buyers' carpital is scarce.