Journal of Financial Research

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 0270-2592

Issue Number

Latest documents

COMPETITION AND MERGER ACTIVITY IN THE U.S. TELECOMMUNICATIONS INDUSTRY
In this article we examine the U.S. telecommunications industry during a period of rapid deregulation to determine the effects of a deregulatory shock on industry competition and merger activity. We show that merger activity exhibits a clear wave‐like pattern, regardless of the listing status of the participants. Increased competition and IPO activity following deregulation increased cash‐flow volatility and probability of exit while the introduction of new technology increased dispersion of economic efficiency across the industry. These changes resulted in a significant increase in merger activity. Competition also played an important role in shaping “who buys whom?”
DO SCANDALS TRIGGER GOVERNANCE CHANGES? EVIDENCE FROM OPTION BACKDATING
We examine whether firms charged with backdating option grants make discernible changes to board structure and activity and whether such changes help recoup value losses from the revelation of option backdating. We find that these firms increased board size, reduced duality, and increased board independence. In addition, the boards and the compensation committees of these firms experienced significant increases in meeting frequency. We also find that firms in the same sectors that had not been identified as backdating option grants experienced similar changes in board activity and some elements of board structure. Additional analysis reveals that increases in board size, chief excutive officer turnover, and the meeting frequency of the audit committee are related to buy‐and‐hold abnormal returns in the postscandal period.
WHOM YOU CONNECT WITH MATTERS: DIRECTOR NETWORKS AND FIRM LOCATION
We examine whether board members serve as a channel for remotely located firms to access the benefits from business‐dense areas due to economies of agglomeration. We find that geographically remote firms benefit from connections to firms in top metropolitan statistical areas (MSAs) for business density. After controlling for director compensation, we find connections to top MSA firms mitigate the negative effect of increased distance from business‐dense areas. We address concerns of endogeneity by exploring a sample of firms whose directors gain board seats at top MSA firms and find a similar positive impact of connections to top MSA firms.
DO DIVIDEND FLOWS AFFECT STOCK RETURNS?
We examine price impacts from dividend flows. Event‐study estimates show that stocks experience abnormal returns on the dividend distribution day. Results also show a spillover effect to non‐dividend‐paying stocks that are likely to be part of the same benchmark portfolio as the dividend‐paying stocks. Regression results indicate that the effect is dependent on the ownership share by professional investors. The temporary nature of the effect on returns is in line with the literature's demand‐driven price pressure hypothesis.
Issue Information
THE EFFECTS OF MUTUAL FUNDS ON M&A COMPENSATION
Motivated by shareholders’ interest in combating executive wealth expropriation through the merger and acqusition (M&A) process, we study how mutual funds influence firm behavior around an acquisition through votes against management proposals. We find that mutual funds reduce the chief executive officer's ability to extract rents during the M&A process by voting against management‐sponsored compensation proposals after the acquisition, thus lowering both excess compensation and increasing pay‐for‐performance sensitivity. Furthermore, mutual fund voting magnifies the impact on negatively performing firms and firms with a larger amount of the mutual fund's holdings in the firm.
LABOR LAWS AND FIRM PERFORMANCE
U.S. labor laws impose higher costs on unionized firms in states without right‐to‐work (RTW) laws. I find that these firms experience poor stock performance. The difference‐in‐differences analysis comparing the effect of RTW laws on unionized and nonunionized firms shows that unionized firms in states without RTW laws underperform by about 7 percentage points per year. I find further evidence of underperformance using alternative methods to estimate abnormal stock performance, examining a natural experiment, showing expected cross‐sectional patterns, and assessing profitability and the market reaction to earnings announcements.
AN ANALYSIS OF SYNDICATED LOAN ANNOUNCEMENTS DURING THE GLOBAL FINANCIAL CRISIS
The recent financial crisis presents an opportunity to examine stock market reactions to syndicated loan decisions reached by borrowers and lenders regarding loan type and loan purpose. We find that during the crisis, the renegotiation flexibility provided by revolving credit is positively valued, whereas during the low‐interest‐rate period following the crisis, both revolving and term loans are viewed favorably. We also examine information asymmetry effects and find that after the crisis, low‐creditworthy borrowers generate a positive market response, but during the crisis, high‐creditworthy borrowers are viewed positively and low‐creditworthy borrowers are punished by the market.
AUTHOR INDEX OF VOLUME XL, 2017
INTERNAL CAPITAL MARKETS, FORMS OF INTRAGROUP TRANSFERS, AND DIVIDEND POLICY: EVIDENCE FROM INDIAN CORPORATES
Firms in a business group share ownership structures, allowing them access to sources of intragroup financing not available to independent firms. Resources could be transferred within a group either through intragroup transactions, primarily operational activities (internal transfers), or through dividends permitting insiders to make investments in other group firms (external transfers). The first strategy predicts lower dividends, and the second predicts the reverse. Using a large data set of listed Indian firms, we look at the costs of internal transfers versus external transfers and find that dividend policies of group firms are better explained by the external transfer hypothesis.