scholarly journals Rethinking Production under Uncertainty

2020 ◽  
Author(s):  
John H Cochrane
Keyword(s):  
Web Site ◽  
Convex Set ◽  
Discount Factor ◽  
Oxford University ◽  
Productivity Shock ◽  
Editorial Decision ◽  
Conventional Models ◽  
States Of Nature ◽  
Natural Productivity ◽  
Published Paper

Abstract Conventional models of production under uncertainty specify that output is produced in fixed proportions across states of nature. I investigate a representation of technology that allows firms to transform output from one state to another. I allow the firm to choose the distribution of its random productivity from a convex set of such distributions described by a limit on a moment of productivity scaled by a natural productivity shock. The model produces a simple discount factor that is linked to productivity and that can be used to price a wide variety of assets, without regard to preferences. (JEL G12) Received November 26, 2019; editorial decision May 23, 2020 by Editor Jeffrey Pontiff. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Noncognitive Abilities and Financial Distress: Evidence from a Representative Household Panel

2019 ◽  
Vol 32 (10) ◽  
pp. 3884-3919 ◽  
Author(s):  
Gianpaolo Parise ◽  
Kim Peijnenburg
Keyword(s):  
Financial Distress ◽  
Web Site ◽  
Income Shocks ◽  
Oxford University ◽  
Editorial Decision ◽  
Differential Exposure ◽  
Published Paper ◽  
Oxford University Press ◽  
Low Ability

AbstractThis paper provides evidence of how noncognitive abilities affect financial distress. In a representative panel of households, we find that people in the bottom quintile of noncognitive abilities are 10 times more likely to experience financial distress than those in the top quintile. We provide evidence that this relation largely arises from worse financial choices and lack of financial insight by low-ability individuals and reflects differential exposure to income shocks only to a lesser degree. We mitigate endogeneity concerns using an IV approach and an extensive set of controls. Implications for policy and finance research are discussed.Received September 24, 2017; editorial decision September 26, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Contingent Capital Trigger Effects: Evidence from Liability Management Exercises

2019 ◽  
Vol 8 (2) ◽  
pp. 235-259 ◽  
Author(s):  
Boris Vallée
Keyword(s):  
Time Series ◽  
Cross Section ◽  
Web Site ◽  
Regulatory Capital ◽  
Oxford University ◽  
Contingent Capital ◽  
Liability Management ◽  
Editorial Decision ◽  
Debt Holders ◽  
Published Paper

AbstractThis paper studies liability management exercises (LME) by banks, which have comparable regulatory capital effects than contingent capital triggers. LMEs are concentrated on low capitalization situations, both in the cross-section and in the time series and are frequently associated with equity issuances. These exercises prove effective at improving bank capitalization levels. The market reaction to LMEs is positive and mostly accrues to debt holders. These findings strengthen the case for innovative liabilities securities as a tool to improve bank resilience.Received February 8, 2019; editorial decision May 16, 2019 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Auto Credit and the 2005 Bankruptcy Reform: The Impact of Eliminating Cramdowns

2019 ◽  
Vol 32 (12) ◽  
pp. 4734-4766 ◽  
Author(s):  
Rajashri Chakrabarti ◽  
Nathaniel Pattison
Keyword(s):  
Interest Rates ◽  
Strong Evidence ◽  
Web Site ◽  
Causal Effect ◽  
Oxford University ◽  
Editorial Decision ◽  
Historical Variation ◽  
The Impact ◽  
Published Paper ◽  
Rule Out

Abstract Auto lenders were perhaps the biggest winners of the 2005 Bankruptcy Reform, as Chapter 13 bankruptcy filers can no longer “cramdown” the amount owed on recent auto loans. We estimate the causal effect of this anticramdown provision on the price and quantity of auto credit. Exploiting historical variation in states’ usage of Chapter 13 bankruptcy, we find strong evidence that eliminating cramdowns decreased interest rates and some evidence that loan sizes increased among subprime borrowers. The decline in interest rates is persistent and is robust to a battery of sensitivity checks. We rule out other reform changes as possible causes. Received September 29, 2016; editorial decision January 15, 2019 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals The Value of Offshore Secrets: Evidence from the Panama Papers

2019 ◽  
Vol 32 (11) ◽  
pp. 4117-4155 ◽  
Author(s):  
James O’Donovan ◽  
Hannes F Wagner ◽  
Stefan Zeume
Keyword(s):  
Web Site ◽  
Market Capitalization ◽  
Listed Firms ◽  
Oxford University ◽  
Editorial Decision ◽  
Published Paper ◽  
Oxford University Press

AbstractWe exploit one of the largest data leaks, to date, to study whether and how firms use secret offshore vehicles. From the leaked data, we identify 338 listed firms as users of secret offshore vehicles and document that these vehicles are used to finance corruption, avoid taxes, and expropriate shareholders. Overall, the leak erased $\$$174 billion in market capitalization among implicated firms. Following the increased transparency brought about by the leak, implicated firms experience lower sales from perceptively corrupt countries and avoid less tax. We conservatively estimate that 1 in 7 firms have offshore secrets.Received May 29, 2017; editorial decision December 2, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Seed-Stage Success and Growth of Angel Co-investment Networks

2021 ◽  
Author(s):  
Buvaneshwaran Venugopal ◽  
Vijay Yerramilli
Keyword(s):  
Web Site ◽  
Oxford University ◽  
Editorial Decision ◽  
Success Experience ◽  
Angel Investment ◽  
To Receive ◽  
Published Paper ◽  
Oxford University Press

Abstract Using hand-collected data, we show that coinvestment is widespread in the angel investment market, even among seed-stage startups. Individual angels with demonstrated seed-stage success experience an increase in the quantity, quality, and geographic and industry spread of their coinvestment connections relative to unsuccessful peers and are rewarded with more deal flow. These results are stronger for less-established angels and for angels whose successes are more indicative of their ability. Success also begets more success: the portfolio companies of successful angels are more likely to receive follow-on financing, especially from VC firms. Our results highlight how angels grow their coinvestment networks. (JEL G24, L14, L26, M13). Received June 8, 2020; editorial decision June 21, 2021 by Editor Isil Erel. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

How Close Are Close Shareholder Votes?

2018 ◽  
Vol 32 (8) ◽  
pp. 3183-3214 ◽  
Author(s):  
Laurent Bach ◽  
Daniel Metzger
Keyword(s):  
Corporate Governance ◽  
Web Site ◽  
Causal Effects ◽  
Say On Pay ◽  
Oxford University ◽  
Shareholder Proposals ◽  
Editorial Decision ◽  
Published Paper ◽  
Oxford University Press

Abstract We show that close votes on shareholder proposals are disproportionately more likely to be won by management than by shareholder activists. Using a sample of shareholder proposals from 2003 to 2016, we uncover a large and discontinuous drop in the density of voting results at the 50% threshold. We document similar patterns for say on pay votes and director elections. Our findings imply that shareholder influence through voting is limited by managerial opposition. It also follows that one cannot routinely use an RDD to identify the causal effects of changes in corporate governance generated by shareholder votes. Received May 29, 2017; editorial decision August 21, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Mortgage Dollar Roll

2018 ◽  
Vol 32 (8) ◽  
pp. 2955-2996 ◽  
Author(s):  
Zhaogang Song ◽  
Haoxiang Zhu
Keyword(s):  
Web Site ◽  
Risk Exposure ◽  
Quantitative Easing ◽  
Prepayment Risk ◽  
Oxford University ◽  
Editorial Decision ◽  
Financing Strategy ◽  
Published Paper ◽  
Oxford University Press

Abstract Mortgage dollar roll, the most common financing strategy for agency MBS, differs from repo in that the returned collateral can differ from those received. Also, MBS ownership changes hands in the funding period. We show that dollar roll “specialness,” how much implied financing rates fall below MBS repo rates, (1) increases in the value of the cheapest-to-deliver option, (2) decreases in the leverage of primary dealers, (3) decreases in prepayment risk exposure during the financing period, and (4) decreases in MBS returns. The Federal Reserve’s dollar roll sales in quantitative easing operations are associated with lower specialness. Received February 3, 2016; editorial decision July 30, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

2020 ◽  
Vol 9 (3) ◽  
pp. 593-621 ◽  
Author(s):  
Rui Albuquerque ◽  
Yrjo Koskinen ◽  
Shuai Yang ◽  
Chendi Zhang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Web Site ◽  
Return Volatility ◽  
Stock Market Crash ◽  
Profit Margins ◽  
Oxford University ◽  
Operating Profit ◽  
Editorial Decision ◽  
Published Paper

Abstract The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of environmental and social (ES) policies. This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of 2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks. (JEL G12, G32, M14) Received: June 3, 2020; editorial decision June 24, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Opportunistic Proposals by Union Shareholders

2018 ◽  
Vol 32 (8) ◽  
pp. 3215-3265 ◽  
Author(s):  
John G Matsusaka ◽  
Oguzhan Ozbas ◽  
Irene Yi
Keyword(s):  
Executive Compensation ◽  
Labor Unions ◽  
Web Site ◽  
Contract Negotiations ◽  
Oxford University ◽  
Editorial Decision ◽  
Contract Expiration ◽  
Published Paper ◽  
Oxford University Press

Abstract This paper investigates whether labor unions use proposals opportunistically to influence contract negotiations. Our empirical strategy relies on the observation that proposals have higher bargaining-chip value in contract expiration years, when a new contract must be negotiated. We find that in contract expiration years compared with nonexpiration years, unions increase their proposal rate by one-fifth, particularly proposals concerning executive compensation. Union proposals made during expiration years are less likely to be supported by other shareholders or a leading proxy advisor; the market reacts negatively to union proposals in expiration years; and withdrawn union proposals are accompanied by higher wage settlements. Received March 14, 2017; editorial decision July 19, 2018 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Priority Spreading of Corporate Debt

2019 ◽  
Vol 33 (1) ◽  
pp. 261-308 ◽  
Author(s):  
Dominique C Badoer ◽  
Evan Dudley ◽  
Christopher M James
Keyword(s):  
Web Site ◽  
Corporate Debt ◽  
Subordinated Debt ◽  
Credit Quality ◽  
Oxford University ◽  
Asset Volatility ◽  
Editorial Decision ◽  
Published Paper ◽  
Oxford University Press

Abstract Priority spreading refers to the practice of firms increasing their reliance on secured and subordinated debt and reducing their reliance on senior debt as their credit quality deteriorates. We argue that priority spreading occurs because security provides creditors with greater protection from dilution from other creditors than do covenants that prioritize payments. Consistent with this argument, we find that secured bank creditors are rarely diluted by junior creditors in distressed restructurings, whereas senior unsecured creditors are frequently diluted, exogenous increases in asset volatility result in greater priority spreading and yields on senior and subordinated bonds converge as asset volatility increases. Received January 22, 2018; editorial decision January 27, 2019 by Editor David Denis. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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