Knowledge that Transforms

We would like to inform all the readers and friends of the Review of Finance that there has been a change of guard among coeditors. Starting with this issue, Franklin Allen, Peter Bossaerts, Colin Mayer and Will Goetzmann are stepping down and are being replaced by Michael Brandt (Duke), Thierry Foucault (HEC Paris), Holger Mueller (NYU Stern) and Steven Ongena (Tilburg). We wish to express our gratitude to the departing coeditors for the splendid job that they have done for so many years: Franklin, Colin and Will since the start of the Review of Finance in 2004, and Peter since 2005. They have all played a crucial role in the journal's success with their hard work, good taste and ability to attract exciting and innovative papers. At the same time, we extend a very warm welcome to the new coeditors, who will contribute fresh energies as well as excellent competencies to the journal. We are also happy to inform you that Bernard Dumas will remain on board as coeditor, and that the departing coeditors have accepted to retain an active role in the journal: Franklin, Colin and Will as advisory editors, and Peter as associate editor.

Winners of the Best Paper Competition in Corporate Governance Get access Review of Finance, Volume 13, Issue 4, October 2009, Page v, https://doi.org/10.1093/rof/rfp027 Published: 01 October 2009

This paper argues, both theoretically and empirically, that sometimes no securities law may be better than a good securities law that is not enforced. The first part of the paper formalizes the sufficient conditions under which this happens for any law. The second part of the paper shows that a specific securities law – the law prohibiting insider trading – may satisfy these conditions. The third part of the paper takes this prediction to the data. We find that the cost of equity actually rises when some countries enact an insider trading law, but do not enforce it.

We show that acquirer returns are significantly higher in stock-swap acquisitions of difficult-to-value targets, as measured by R&D intensity and idiosyncratic return volatility. This finding contributes to an explanation of the determinants of, and value gains from, using stock as a method of payment. The effects of target-valuation uncertainty on both the method of payment and the market reaction to acquisitions are more likely to be apparent in samples of private acquisitions, as these effects can be masked in samples of acquisitions of publicly held targets. Nevertheless, our results hold for publicly traded targets in multivariate analysis.

We investigate how bank organization shapes banking competition. We show that a bank's geographical lending reach and loan pricing strategy is determined by its own and its rivals’ organizational structure. We estimate the impact of organization on the geographical reach and loan pricing of a large bank. We find that the reach of the bank is smaller when rival banks are large and hierarchically organized, have superior communication technology, have a narrower span of organization, and are closer to a decision unit with lending authority. Rival banks’ size and the number of layers to a decision unit soften spatial pricing.

Sequential financing is a popular strategy in corporate finance. However, depending on the type of financial instrument used to carry out the strategy, sequential financing can have many potential problems. This paper shows that certain types of convertibles can be deployed to resolve the problems completely. This may explain why convertibles are widely adopted to implement sequential financing in reality, especially among companies with many real options. We find that the call feature and some popular call restrictions are necessary for an efficient convertible. Indeed, almost all real-world convertibles have a call feature and call restrictions.