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Tacit collusion among dominant banks: Evidence from round-yard loan pricing
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-02-13 DOI: 10.1016/j.jcorpfin.2025.102750
Yu-Ju Chan , Chih-Yung Lin , Tse-Chun Lin
{"title":"Tacit collusion among dominant banks: Evidence from round-yard loan pricing","authors":"Yu-Ju Chan ,&nbsp;Chih-Yung Lin ,&nbsp;Tse-Chun Lin","doi":"10.1016/j.jcorpfin.2025.102750","DOIUrl":"10.1016/j.jcorpfin.2025.102750","url":null,"abstract":"<div><div>While there is no apparent reason for loan spreads to cluster at certain numbers, we find that approximately 70 % of bank loans have round-yard spreads (i.e., multiples of 25 basis points). We hypothesize that dominant banks implicitly collude using round yards as focal pricing points when negotiating with borrowers. Tacit collusion leads to higher spreads and total costs of round yard priced loans than of non-round yard priced loans. Consistent with our tacit collusion hypothesis, dominant banks round up loans to multiple yards rather than rounding them down. Moreover, round-yard pricing is more prevalent among lower-quality and nonrepeat borrowers.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"92 ","pages":"Article 102750"},"PeriodicalIF":7.2,"publicationDate":"2025-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143429045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Surviving the storm: Evaluating the role of enterprise risk management in property and liability insurers' performance during the COVID-19 pandemic
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-02-12 DOI: 10.1016/j.jcorpfin.2025.102751
Derrick W.H. Fung , Wing Yan Lee , Charles C. Yang
{"title":"Surviving the storm: Evaluating the role of enterprise risk management in property and liability insurers' performance during the COVID-19 pandemic","authors":"Derrick W.H. Fung ,&nbsp;Wing Yan Lee ,&nbsp;Charles C. Yang","doi":"10.1016/j.jcorpfin.2025.102751","DOIUrl":"10.1016/j.jcorpfin.2025.102751","url":null,"abstract":"<div><div>This study examines whether the implementation of a mature enterprise risk management (ERM) framework by property and liability insurers improved their resilience in the face of the COVID-19 pandemic. To address the potential problem of endogeneity, we analyze a panel dataset of listed property and liability insurers from around the world using the propensity score matching method. Subsequently, a two-step “doubly robust” estimation method is employed. The results reveal that the performance of insurers with less mature ERM frameworks was adversely affected by the pandemic but that of insurers with more mature ERM frameworks was not. These findings remain consistent after conducting various robustness checks. Separate consideration of each ERM component reveals that no component independently enhanced insurers' resilience; rather, the components collectively enhanced their resilience. Overall, this study provides valuable insights for insurers and regulators aiming to enhance the industry's ability to withstand future challenges.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102751"},"PeriodicalIF":7.2,"publicationDate":"2025-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143419492","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Real options and CEO social connections: The role of financial flexibility
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-02-10 DOI: 10.1016/j.jcorpfin.2025.102749
Md Nazmul Hasan Bhuyan , Luis García-Feijóo , Tijana Rajkovic
{"title":"Real options and CEO social connections: The role of financial flexibility","authors":"Md Nazmul Hasan Bhuyan ,&nbsp;Luis García-Feijóo ,&nbsp;Tijana Rajkovic","doi":"10.1016/j.jcorpfin.2025.102749","DOIUrl":"10.1016/j.jcorpfin.2025.102749","url":null,"abstract":"<div><div>We examine the impact of CEO social connections on the value of real options. Consistent with the benefits of information transmission, reputation, and trust embedded in social connections, we find that CEO social connections act as real option facilitator through improved financial flexibility, alleviating financial constraints. The effect of CEO social connections is stronger for firms with high growth opportunities and when the CEO has a longer-term career horizon and greater ability. CEO social connections have an increasingly stronger impact on the value of real options. Overall, social connections influence the value of real options, a novel finding in the literature.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102749"},"PeriodicalIF":7.2,"publicationDate":"2025-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143419592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
How does the structure of an interest expense cap change the tax benefits of debt?
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-02-08 DOI: 10.1016/j.jcorpfin.2025.102747
Karan Bhanot , Pascal François , Palani-Rajan Kadapakkam
{"title":"How does the structure of an interest expense cap change the tax benefits of debt?","authors":"Karan Bhanot ,&nbsp;Pascal François ,&nbsp;Palani-Rajan Kadapakkam","doi":"10.1016/j.jcorpfin.2025.102747","DOIUrl":"10.1016/j.jcorpfin.2025.102747","url":null,"abstract":"<div><div>Using an earnings-based structural model, calibrated with US data for the period 2001–2017, we examine how the structure of an interest expense cap for the deduction of interest expense changes the tax benefits of debt. We find that an EBIT (EBITDA) based cap reduces the marginal tax benefits of debt by 6 percentage points (4.6 p.p.) of unlevered firm value for a typical firm. This impact differs across industries due to variations in industry-specific labor and physical capital deployed, and the associated depreciation. An EBITDA-based structure for a cap reduces the differential tax impact of a cap across industries. Our results are widely applicable in determining the cost of debt in the presence of these cap structures, enshrined in the US and OECD countries.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102747"},"PeriodicalIF":7.2,"publicationDate":"2025-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143418856","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The stock market reaction to bond refinancing issues with and without senior debt
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-29 DOI: 10.1016/j.jcorpfin.2025.102746
Axel Grossmann , Thanh Ngo
{"title":"The stock market reaction to bond refinancing issues with and without senior debt","authors":"Axel Grossmann ,&nbsp;Thanh Ngo","doi":"10.1016/j.jcorpfin.2025.102746","DOIUrl":"10.1016/j.jcorpfin.2025.102746","url":null,"abstract":"<div><div>Using a sample of 3228 bond issues of U.S. publicly traded companies from 1990 to 2021, we find a statistically significant negative stock market reaction surrounding the announcements of debt issues aimed at refinancing outstanding debt when compared to debt issues for other purposes. The results are not driven by public debt being used to refinance “inside” debt, such as bank loans. This finding aligns with signaling theory, which suggests that replacing existing debt with new debt may indicate unfavorable conditions: difficulty servicing current debt obligations with existing resources or a lack of future growth opportunities. These negative market reactions are mitigated, however, when firms use less risky senior debt to refinance existing debt. Senior notes serve as a strategic move by firms to counter the negative market perception associated with debt refinancing issues. The findings are particularly more pronounced for the decades after 1999, albeit with a reduced magnitude in the 2010s, suggesting that the Global Financial Crisis in the 2000s made markets more sensitive to negative signals related to public debt refinancing. The main findings are robust to potential biases brought about by measurement errors, simultaneity, and endogeneity.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102746"},"PeriodicalIF":7.2,"publicationDate":"2025-01-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143148512","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Political corruption, Dodd–Frank whistleblowing, and debt financing
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-28 DOI: 10.1016/j.jcorpfin.2025.102745
Qingjie Du , Iftekhar Hasan , Yang Wang , K.C. John Wei
{"title":"Political corruption, Dodd–Frank whistleblowing, and debt financing","authors":"Qingjie Du ,&nbsp;Iftekhar Hasan ,&nbsp;Yang Wang ,&nbsp;K.C. John Wei","doi":"10.1016/j.jcorpfin.2025.102745","DOIUrl":"10.1016/j.jcorpfin.2025.102745","url":null,"abstract":"<div><div>We investigate how a state's political corruption affects a resident firm's debt contracting and how a change in anti-corruption regulation alters the relation between corruption and loan contracting. Firms in more corrupt states are associated with significantly higher loan spreads and tighter loan covenants than firms in less corrupt states. Furthermore, the passage of the Dodd–Frank whistleblowing provision amplifies the conhcerns of banks about the detrimental impact of corruption due to the increased exposure of firms to whistleblowing threats. The detrimental impact of corruption is further amplified when a state has a higher level of whistleblowing involvement, when firms are located in more corrupt states or closer to the SEC office, and when the bank's state is less corrupt than the firm's state. In general, we document the externality of corruption in the debt financing of firms and the response of banks to changes in regulation.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102745"},"PeriodicalIF":7.2,"publicationDate":"2025-01-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143148626","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Dark trading volume and market quality: A natural experiment
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-27 DOI: 10.1016/j.jcorpfin.2025.102742
Ryan Farley, Eric K. Kelley, Andy Puckett
{"title":"Dark trading volume and market quality: A natural experiment","authors":"Ryan Farley,&nbsp;Eric K. Kelley,&nbsp;Andy Puckett","doi":"10.1016/j.jcorpfin.2025.102742","DOIUrl":"10.1016/j.jcorpfin.2025.102742","url":null,"abstract":"<div><div>We exploit an exogenous shock to dark trading volume to identify the effect of dark trading on market quality. Following a 34% reduction in trading on dark venues, we find no evidence that the cost of trade (e.g., effective spreads, realized spreads, price impact, and quoted spreads) changes in a statistically or economically meaningful manner. While our findings stand in contrast to those of several prior studies, supplemental tests confirm that contradictory inferences cannot be attributed to either low power or different stock samples or time periods. Instead, we argue that identification is a key driver in conflicting results. Our research highlights the benefit of structured experimentation from the Securities and Exchange Commission (SEC) for understanding causal effects in capital markets.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102742"},"PeriodicalIF":7.2,"publicationDate":"2025-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143388221","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Risk-taking incentives and firm credit risk1
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-27 DOI: 10.1016/j.jcorpfin.2025.102738
Kevin Koharki , Luke Watson
{"title":"Risk-taking incentives and firm credit risk1","authors":"Kevin Koharki ,&nbsp;Luke Watson","doi":"10.1016/j.jcorpfin.2025.102738","DOIUrl":"10.1016/j.jcorpfin.2025.102738","url":null,"abstract":"<div><div>Theoretically, increased risk-taking incentives should disproportionately benefit equity holders at the expense of creditors. However, we find that increases in CEO risk-taking incentives (vega) are associated with better outcomes for creditors. Specifically, credit ratings and credit default swaps both improve following increases in vega. This effect is magnified for firms close to default. Within the Merton (1974) framework, our findings suggest that increased risk-taking incentives induce managers to take on more positive net present value projects. Consequently, while higher vega increases the risk of the firm, our results imply that it also increases the expected value of the firm, reducing its credit risk.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102738"},"PeriodicalIF":7.2,"publicationDate":"2025-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143148625","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Clawback adoptions and institutional investment decisions
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-25 DOI: 10.1016/j.jcorpfin.2025.102743
Kwok Tong Samuel Cheung , Simon Yu Kit Fung , K.K. Raman , Jianfu Shen
{"title":"Clawback adoptions and institutional investment decisions","authors":"Kwok Tong Samuel Cheung ,&nbsp;Simon Yu Kit Fung ,&nbsp;K.K. Raman ,&nbsp;Jianfu Shen","doi":"10.1016/j.jcorpfin.2025.102743","DOIUrl":"10.1016/j.jcorpfin.2025.102743","url":null,"abstract":"<div><div>We examine whether voluntary adoptions of clawback (executive compensation recovery) provisions are followed by changes in market outcomes, specifically changes in institutional investment decisions. Institutional investors dominate the US capital markets and are generally viewed as informed investors. Using difference-in-differences (DID) research design, we find that clawback adoptions are followed by a decrease (increase) in transient (dedicated) institutional investors' equity holdings. Our findings are robust to both level and change specifications. Also, the decrease (increase) in holdings for transient (dedicated) investors is stronger for adopters who display reduced information asymmetry (increase in long-term orientation) following clawback adoption. The results are robust to several tests for endogeneity and alternative specifications. Collectively, our findings suggest that clawback adoptions make the firm potentially less attractive to transient institutions and more desirable to dedicated institutions. Our findings have implications for clawback adoptions that are now mandatory for all US public companies with an effective date (most recently) of December 1, 2023.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102743"},"PeriodicalIF":7.2,"publicationDate":"2025-01-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143148510","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Does commercial reform embracing digital technologies mitigate stock price crash risk?
IF 7.2 1区 经济学
Journal of Corporate Finance Pub Date : 2025-01-23 DOI: 10.1016/j.jcorpfin.2025.102741
Guanming He , Zhichao Li , Ling Yu , Zhanqiang Zhou
{"title":"Does commercial reform embracing digital technologies mitigate stock price crash risk?","authors":"Guanming He ,&nbsp;Zhichao Li ,&nbsp;Ling Yu ,&nbsp;Zhanqiang Zhou","doi":"10.1016/j.jcorpfin.2025.102741","DOIUrl":"10.1016/j.jcorpfin.2025.102741","url":null,"abstract":"<div><div>Over the recent decade or so, the Chinese government implemented a commercial reform that features governmental application of digital technologies to acquire and process firm information. The core objective of commercial reform is to improve information transparency and monitoring on corporate commercial activities. To explore the economic effectiveness of the reform, we examine how it impacts firms' stock price crash risk. We find robust evidence that the commercial reform that digitalizes government regulatory activities mitigates stock price crash risk and achieves so via enhancing information environment and monitoring for firms. This finding is more prominent for firms with higher levels of digitalization and innovation and those with weaker internal governance. Overall, our findings highlight a potential benefit of applying digital technologies to regulatory reform, encouraging governments to adopt digital tools to improve information environments and monitoring for firms, and thereby promoting a more stable and efficient capital market.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"91 ","pages":"Article 102741"},"PeriodicalIF":7.2,"publicationDate":"2025-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143148511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
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