This paper uses the entry of foreign banks into India during the 1990s—analyzing variation in both the timing of the new foreign banks’ entries and in their location—to estimate the effect of foreign bank entry on domestic credit access and firm performance. In contrast to the belief that foreign bank entry should improve credit access for all firms, the estimates indicate that foreign banks financed only a small set of very profitable firms upon entry, and that on average, firms were 8 percentage points less likely to have a loan after a foreign bank entry because of a systematic drop in domestic bank loans. Similar estimates are obtained using the location of pre-existing foreign firms as an instrument for foreign bank locations. Moreover, the observed decline in loans is greater among smaller firms, firms with fewer tangible assets, and firms affiliated with business groups. The drop in credit also appears to adversely affect the performance of smaller firms with greater dependence on external financing. Overall, this evidence is consistent with the exacerbation of information asymmetries upon foreign bank entry.

Despite extensive monitoring, banking operations are often considered opaque, and despite explicit capital adequacy regulation, banks may have substantial discretion in their financing. Both monitoring and capital regulation have changed substantially over time, with the adoption of FDICIA being one important breakpoint. This article empirically studies seasoned equity offerings (SEOs) by banks to understand how opacity and capital regulation interact to determine the timing of bank SEOs and their market valuation. SEOs both by banks that are undercapitalized relative to regulatory standards and also well-capitalized banks are fully discretionary when it comes to SEOs, even before FDICIA. Both undercapitalized and well-capitalized banks experience similar and significantly negative stock price reactions to SEO announcements, and also have similar prior patterns of insider trading and similar economic drivers of the issuance decision. Moreover, post-SEO abnormal stock returns are similar to benchmark returns for both types of issuers in the long run, suggesting that, contrary to the well-documented evidence for industrial SEOs, investors understand the value implications of bank SEOs upon announcement. The evidence implies that undercapitalized banks' SEOs are more discretionary and that all bank SEOs are less opaque than implied by earlier studies.

We describe four channels through which breakups can potentially increase idiosyncratic volatility for parent firms. These are: loss of diversification (portfolio effect), change in growth opportunities, change in operational efficiency, and the flow and assimilation of information (information effect). The relevance of each channel depends on the mode of a breakup. We explain conceptually and show empirically, using a sample of 530 breakups (259 spinoffs and 271 equity carveouts), that the portfolio effect is dominant for spinoff parents, while the information effect gains importance for carveout parents. Our novel insight is that the magnitude of the information effect depends on the pre-announcement information set held by investors; we provide a simple state-space model and empirical evidence to support this intuition. We also find a relation between the change in operational efficiency and the change in idiosyncratic volatility for spinoff parents.

I conduct an empirical investigation into the pricing of subprime asset-backed collateralized debt obligations (CDOs) and their contagion effects on other markets. Using data for the ABX subprime indexes, I find strong evidence of contagion in the financial markets. The results support the hypothesis that financial contagion was propagated primarily through liquidity and risk-premium channels, rather than through a correlated-information channel. Surprisingly, ABX index returns forecast stock returns and Treasury and corporate bond yield changes by as much as three weeks ahead during the subprime crisis. This challenges the popular view that the market prices of these “toxic assets” were unreliable; the results suggest that significant price discovery did in fact occur in the subprime market during the crisis.

This paper investigates the impact of demographic shocks on optimal decisions about saving, life insurance, and, most centrally, asset allocation. The analysis indicates that marital-status transitions can have important effects on optimal household decisions, particularly in the cases of widowhood and divorce. Children also play a fundamental role in portfolio choice; in addition to leading to substantially different average allocations, they also have strong interaction effects with changes in marital status. Panel data evidence on stockholding suggests that changes in marital status and children matter empirically as well, but not always in the manner that the model predicts. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.

This paper argues that academics, politicians, and the media have six commonly held but misguided beliefs about corporate governance. While Armstrong et al. (2010) discuss some of these misconceptions, a wider recognition that these beliefs are actually “myths” is important. They include: (1) a common definition of “corporate governance” exists; (2) a useful distinction is “internal” versus “external” governance mechanisms; (3) outside directors perform two separable roles: to advise and monitor managers; (4) research has identified “good” and “bad” governance practices; (5) a “good” governance index can be constructed; and (6) corporate governance “best practices” can be deduced from peer data.

ABSTRACT This paper studies managers' preferences among information acquisition and disclosure policies when their firms are required to engage in “real‐time” or “continuous” financial reporting. The paper predicts that for many, but not all, processes describing the distribution of their firms' cash flows, when subject to such reporting requirements, managers will engage in disclosure “bunching,” that is, they will bunch the discretionary component of the information they acquire and disclose into a single point in time rather than spread the acquisition and disclosure of that information over time. We show that managers' preferred bunching period depends on managers' strategy for trading in their firms' shares, managers' risk aversion, the risk premium the capital market attaches to firms' shares, and the size of managers' initial ownership stakes in their firms. We also study and characterize how the equilibrium prices of firms' shares vary over time and also how managers' optimal trading strategies vary with their most preferred “bunching” strategies. Several extensions confirm the robustness of the optimality of disclosure “bunching.”