The underpricing of initial public offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory where investors worry also about the after-market illiquidity that may result from asymmetric information after the IPO. The less liquid the aftermarket is expected to be, and the less predictable its liquidity, the larger will be the IPO underpricing. Our model blends such liquidity concerns with adverse selection and risk as motives for underpricing. The model's predictions are supported by evidence for 337 British IPOs effected between 1998 and 2000. Using various measures of liquidity, we find that expected after-market liquidity and liquidity risk are important determinants of IPO underpricing.

Using a firm-level international panel data set, we study if unemployment insurance offered by the government and by firms are substitutes. We exploit cross-country and time-series variation in public unemployment insurance as a shifter of workers’ demand for insurance within firms, and family versus nonfamily ownership as a shifter of firms’ supply of insurance. Our evidence supports the substitutability hypothesis: employment stability in family firms is greater, and the wage discount larger, in countries and periods with less generous public unemployment insurance, whereas no such substitutability emerges for nonfamily firms.

[This paper shows that during episodes of market turmoil, 13F institutional investors with short trading horizons sell their stockholdings to a larger extent than 13F institutional investors with longer trading horizons. This creates price pressure for stocks held mostly by short-horizon investors, which, as a consequence, experience larger price drops, and subsequent reversals, than stocks held mostly by long-horizon investors. These findings, obtained after controlling for the withdrawals experienced by the investors, are not driven by other institutional investors' and firms' characteristics. Overall, the evidence indicates that investors with short horizons amplify the effects of market-wide negative shocks by demanding liquidity at times when other potential buyers' capital is scarce.]

The underpricing of initial public offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory where investors worry also about the after-market illiquidity that may result from asymmetric information after the IPO. The less liquid the aftermarket is expected to be, and the less predictable its liquidity, the larger will be the IPO underpricing. Our model blends such liquidity concerns with adverse selection and risk as motives for underpricing. The model’s predictions are supported by evidence for 337 British IPOs effected between 1998 and 2000. Using various measures of liquidity, we find that expected after-market liquidity and liquidity risk are important determinants of IPO underpricing.

We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation. Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these scarring effects can be ascribed to a drop in asset managers’ reputation. The findings suggest that performance-induced liquidations supplement compensation-based incentives.

Using a firm-level international panel data set, we study if unemployment insurance offered by the government and by firms are substitutes. We exploit cross-country and time-series variation in public unemployment insurance as a shifter of workers’ demand for insurance within firms, and family versus nonfamily ownership as a shifter of firms’ supply of insurance. Our evidence supports the substitutability hypothesis: employment stability in family firms is greater, and the wage discount larger, in countries and periods with less generous public unemployment insurance, whereas no such substitutability emerges for nonfamily firms. Received July 18, 2015; editorial decision August 8, 2017 by Editor Francesca Cornelli.

This paper shows that during episodes of market turmoil, 13F institutional investors with short trading horizons sell their stockholdings to a larger extent than 13F institutional investors with longer trading horizons. This creates price pressure for stocks held mostly by short-horizon investors, which, as a consequence, experience larger price drops, and subsequent reversals, than stocks held mostly by long-horizon investors. These findings, obtained after controlling for the withdrawals experienced by the investors, are not driven by other institutional investors' and firms' characteristics. Overall, the evidence indicates that investors with short horizons amplify the effects of market-wide negative shocks by demanding liquidity at times when other potential buyers'capital is scarce.

The Society for Financial Studies (SFS) is a global, nonprofit academic society in finance. It owns and runs three academic journals: (1) the Review of Asset Pricing Studies, (2) the Review of Corporate Finance Studies, and (3) the Review of Financial Studies. It also organizes two annual academic conferences: (1) the SFS Cavalcade Asia-Pacific and (2) the SFS Cavalcade North America. It also runs several smaller, specialized conferences and financially supports and co-sponsors other independent conferences. Its governing board is the SFS Council. SFS holds an annual membership meeting in May every year. At that meeting the SFS President, Executive Editors, Cavalcade Chair, and Secretary-Treasurer report on SFS activities. This year, for the first time, we have written up those reports and integrated them into this annual report of the Society for Financial Studies, which will be published in all three SFS journals. The reasons for doing this are to share this information more broadly with SFS members and friends and to create a permanent record for the long run (that is, institutional memory).

The Society for Financial Society (SFS) is a global, nonprofit academic society in finance. It owns and runs three academic journals: (1) the Review of Asset Pricing Studies, (2) the Review of Corporate Finance Studies, and (3) the Review of Financial Studies. It also organizes two annual academic conferences: (1) the SFS Cavalcade Asia-Pacific and (2) the SFS Cavalcade North America. It also runs several smaller, specialized conferences and financially supports and co-sponsors other independent conferences. Its governing board is the SFS Council. This annual report provides an overview of SFS activities during 2019-2020, including all three journals, both Cavalcade conferences, and the SFS financial and policy report. The purpose of this annual report is to share this information more broadly with SFS members and friends and to create a permanent record for the long-run (i.e., institutional memory).

Financial intermediaries often provide guarantees resembling out-of-the-money put options, exposing them to undiversifiable tail risk. We present a model in the context of the U.S. life insurance industry in which the regulatory framework incentivizes value-maximizing insurers to hedge variable annuity (VA) guarantees, though imperfectly, and shifts risks into high-risk and illiquid bonds. We calibrate the model to insurer-level data and identify the VA-induced changes in insurers’ risk exposures. In the event of major asset and guarantee shocks and absent regulatory intervention, these shared exposures exacerbate system-wide fire sales to maintain capital ratios, plausibly erasing over half of insurers’ equity capital.