{"title":"The threat of voiced shareholder disapproval and the value of voting","authors":"Justin Balthrop, Jonathan Bitting","doi":"10.1111/jfir.12417","DOIUrl":"https://doi.org/10.1111/jfir.12417","url":null,"abstract":"<p>We study how granting shareholders an advisory compensation vote affects the subsequent demand for shareholder voting rights. We find that the voting premium decreases when shareholders are given the right to disapprove firm compensation plans, consistent with shareholders preemptively negotiating concessions, which results in a diminished need to use their votes. Potential concessions extend beyond compensation; firms that experience a decrease in voting premiums also experience changes to investment and dividend policy, as well as the number of independent directors. The same firms experience positive abnormal stock returns over the following year.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 2","pages":"473-502"},"PeriodicalIF":1.5,"publicationDate":"2024-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/jfir.12417","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144213834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Who can see the iceberg's peak? How icebergs are used by information and liquidity traders","authors":"Paul Lajbcygier, Van Hoang Vu","doi":"10.1111/jfir.12414","DOIUrl":"10.1111/jfir.12414","url":null,"abstract":"<p>Iceberg orders are partially disclosed limit orders that only reveal a small portion of their hidden volume at any time. Once traded, the iceberg order automatically replenishes until all its hidden volume executes. Consistent with theory, icebergs appeal to both information and liquidity traders. Information traders place orders at aggressive prices in the limit order book, which transact immediately as marketable orders. Liquidity traders use non-aggressive orders, which sit on the book as limit orders. Iceberg traders adjust the aggressiveness of their orders as market conditions change. We find the market discovers iceberg orders through repeated replenishments.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"227-265"},"PeriodicalIF":1.5,"publicationDate":"2024-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/jfir.12414","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141266705","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Model for optimizing lender's decision on dealing with collateral of defaulted mortgage","authors":"Shu Ling Chiang, Ming Shann Tsai","doi":"10.1111/jfir.12416","DOIUrl":"10.1111/jfir.12416","url":null,"abstract":"<p>In this article, we describe a comprehensive model for obtaining a critical gross recovery rate (GRR) for the short sale of a defaulted mortgage. Our model includes the following factors: settlement period, settlement cost, discounted sale/auction price, opportunity cost, failure probability of the short sale, and lender's willingness for the short sale. The results show that using the short sale yields a lower settlement cost, shorter settlement period, but higher loss given default (LGD). The real GRR of a short sale is about 8%–9% less than the critical GRR calculated from our model. This means the lender's willingness for the short sale is high in reality. The sensitivity analyses show that the lender's likelihood of approving a short sale is low if the settlement cost, contract rate, interest rate, and failure probability of the short sale are high. The greater the expected LGD of a foreclosure, the stronger the lender's willingness to approve the short sale. Also, a higher GRR of short sale leads to a lower expected LGD of short sale. This increases the probability of approval for the short sale. Finally, the Home Affordable Foreclosure Alternatives (HAFA) program helped struggling homeowners successfully use a short sale as an alternative to foreclosure, but the HAFA program became less effective as housing prices went up. Our model and analyses should help lenders make the optimal decision about how to efficiently deal with the collateral from a defaulted mortgage to mitigate their LGD.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 2","pages":"785-806"},"PeriodicalIF":1.5,"publicationDate":"2024-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141265885","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Organizational capital and private placements of common equity","authors":"Oneil Harris, Thanh Ngo","doi":"10.1111/jfir.12418","DOIUrl":"10.1111/jfir.12418","url":null,"abstract":"<p>We examine the impact of organizational capital (OC) on the performance of firms that engage in private equity placements. We document larger discounts in stock sales where issuers have more OC, which suggests that private equity investors demand a higher risk premium to compensate for OC risk. We also find the private placements completed by high-OC issuers elicit more favorable announcement-period returns and superior postissue performance than those completed by low-OC issuers. These findings are consistent with the certification hypothesis and support research showing that OC improves firm efficiency and productivity. Our study sheds light on the importance of OC as a determinant of issuer outcome in private stock sales. Overall, our empirical results imply that OC reflects value-relevant information that is consistent with certification benefits.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 2","pages":"807-837"},"PeriodicalIF":1.5,"publicationDate":"2024-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141273801","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Anup Basnet, Kuntara Pukthuanthong, Harry Turtle, Thomas Walker
{"title":"VC ownership post-IPO: When, why, and how do VCs exit?","authors":"Anup Basnet, Kuntara Pukthuanthong, Harry Turtle, Thomas Walker","doi":"10.1111/jfir.12412","DOIUrl":"10.1111/jfir.12412","url":null,"abstract":"<p>We examine the evolution of lead venture capital firm (VC) ownership after their portfolio companies (PCs) are publicly listed. We find that, on average, lead VCs retain their shares for three years post-IPO. Higher liquidity pressure and better stock market performance lead to faster VC exits, while higher VC reputation, better VC monitoring, and higher quality PCs lead to slower exits. VCs mostly use sales in the open market, share distributions, and mergers and acquisitions to divest their shares. Higher liquidity pressure incentivizes VCs to use majority share distributions, while better stock market performance increases their preference for continuous sales.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"73-102"},"PeriodicalIF":1.5,"publicationDate":"2024-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/jfir.12412","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141196716","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Qingxi Meng, Shenwei Mo, Xiaofeng Quan, Joseph H. Zhang
{"title":"Social media and cost of debt financing: Evidence from stock forum text analysis","authors":"Qingxi Meng, Shenwei Mo, Xiaofeng Quan, Joseph H. Zhang","doi":"10.1111/jfir.12413","DOIUrl":"10.1111/jfir.12413","url":null,"abstract":"<p>In this article, we examine whether and how small investors’ social media activity is associated with subsequent bond credit spreads. We use extensive data from posts/comments on social media 30 days before the bond issuance announcement date to identify their implied power and find that the more posts/comments, the smaller the bond issuance spreads. We further find that information quality improvement of posts increases this negative relation between social media activity and bond cost, and that posts directly related to issuers’ fundamentals and/or debt financing drive our main results. Additional tests show that the effect is more salient when there is a greater demand for information quality or when macroeconomic conditions worsen.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"103-131"},"PeriodicalIF":1.5,"publicationDate":"2024-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141196721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Project risk and the bank monitored credit line","authors":"Eric Van Tassel","doi":"10.1111/jfir.12411","DOIUrl":"10.1111/jfir.12411","url":null,"abstract":"<p>In this paper we investigate the role a monitored credit line plays in managing a firm's liquidity needs and influencing the firm's project risk. We develop a theoretical model where a firm finances a risky project that is subject to a liquidity shock. External lenders are imperfectly informed about both project risk and the firm's liquidity, which leads to moral hazard. We identify conditions under which it is optimal for the firm to fund the project using a term loan from a less informed lender and manage liquidity using a line of credit from an informed lender.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"149-166"},"PeriodicalIF":1.5,"publicationDate":"2024-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141196656","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Debt dispersion and corporate liquidity","authors":"Goutham Abotula, Douglas (DJ) Fairhurst","doi":"10.1111/jfir.12410","DOIUrl":"10.1111/jfir.12410","url":null,"abstract":"<p>Cash holdings are significantly lower for firms with dispersed debt maturity, and this finding is robust to entropy balancing and allowing for the simultaneous selection of dispersion and cash holdings. The relation is strongest for firms with shorter debt maturity and firms that rely on precautionary cash, such as financially constrained firms and firms with volatile cash flows. Markets place a lower value on the cash of firms with high or increasing dispersion, and these firms retain less cash. Collectively, the evidence implies that firms can hedge rollover risk with dispersed debt maturity as an alternative to holding costly cash.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"41-72"},"PeriodicalIF":1.5,"publicationDate":"2024-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141118067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The role of existing shareholders in private equity placements in China","authors":"Yini Liu, Di Lu, Suhua Tian","doi":"10.1111/jfir.12405","DOIUrl":"10.1111/jfir.12405","url":null,"abstract":"<p>In this article, we investigate how the participation of firms’ existing shareholders affects the pricing and valuation of private investments in public equity (PIPEs). Using a large sample of PIPEs issued by Chinese listed firms from 2006 to 2019, we find that the effective discount and long-term buy-and-hold abnormal stock returns of PIPEs with existing shareholder participation are significantly higher than those with only new investor participation, after controlling for heterogeneous types of PIPE investors. However, the superior post-PIPE stock performance of deals with existing shareholders is not driven by improved operating performance but by tunneling activities such as frequent dividend announcements, related-party transactions, and positive earnings management during the lock-up period. Our findings suggest that the effect of existing shareholders’ participation in private equity placements is more consistent with the tunneling hypothesis than the certification hypothesis. We document that the tunneling incentives are stronger when firms face greater financial constraints and can be mitigated when the firm's corporate governance is stronger.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"351-385"},"PeriodicalIF":1.5,"publicationDate":"2024-05-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140972625","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Synthetic long stock and option trading: Evidence from stock splits","authors":"Yifan Liu, Louis R. Piccotti","doi":"10.1111/jfir.12404","DOIUrl":"10.1111/jfir.12404","url":null,"abstract":"<p>We theoretically and empirically identify synthetic long stock as an alternative driver of option trading. Our model proves that the use of synthetic long stocks by capital-constrained traders contributes to at-the-money (ATM) option trading. Using an event study based on stock splits, we document empirical evidence consistent with the model's predictions. ATM option trading declines after stock splits, and these declines are more pronounced for stock splits with higher stock split factors and for more illiquid stocks but are less pronounced for more illiquid options. Our study implies that option trading can occur even without information or opinion dispersion.</p>","PeriodicalId":47584,"journal":{"name":"Journal of Financial Research","volume":"48 1","pages":"321-350"},"PeriodicalIF":1.5,"publicationDate":"2024-05-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140838335","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}