We shed light on the narrative that listing contributes to risk-taking by examining the risk characteristics of listed BHCs, small enough to be private, against a sample of comparable private BHCs, large enough to be listed, over the 1987–2019 period. We measure our proxies for risk characteristics over different intervals in the sample period to account for the effect of new regulations and variation in the intensity of information production by regulators, markets, and financial firms. We document that listed banks are riskier than private banks over the 22-year sample period. Examining the subperiods, we find that listed banks are riskier than private banks before the crisis, but they may not be as risky following the crisis. While risk increases for all banks during the crisis, the increase in risk for listed banks during the crisis is greater than that for private banks. Our findings are both statistically and economically significant and suggest that financial reforms and regulatory expectations facing banks post-crisis might have contributed to the risk reduction for listed banks relative to private banks.

Contracting theory predicts that greater equity-related compensation will decrease the agency problems of equity but may exacerbate the agency problems of debt. We present evidence that the agency costs of debt may have declined during the 1990s. Specifically, changes in the financial characteristics of our sample firms suggest that underinvestment, asset substitution, and financial distress became less likely. Furthermore, agency costs of equity increased during the 1990s, primarily because firms became more difficult to monitor. Together, the findings provide an explanation for why more firms used option-based compensation in the latter 1990s, and why the proportion of options in compensation structure increased throughout the decade of the 1990s.

This paper focuses on how differences in national culture may relate to cross-country differences in the structure of executive compensation contracts. We know that firms design executive compensation contracts to reduce conflicts of interest between owners and managers. We contend that cultural context affects these conflicts of interest and hypothesize that firms from cultures that are similar (different) should design compensation contracts that are similar (different). To specify cultural context, we calculate cultural distance using value dimensions from Hofstede (1980) and test for a relation between culture and contracting using compensation data for 39 countries from 1996–2009. Our findings indicate that culture is a significant determinant of cross-sectional differences in compensation structures. These results are robust to our use of instrumental variables methodologies (to mitigate concerns of potential omitted variables and reverse causation). By exploring the relatively unexplored impact of national culture on compensation structure, we hope to contribute to a better overall understanding of contracting decisions.

Eurocurrency deposit rates for Germany, Japan, the UK and the US are used to investigate term structure linkages over the 1979–85 and 1986–01 periods. A single common trend drives the term structure in each country, with 1-month rates generally having little or no influence in setting the long-term trend. Cointegration and common factor analyses based on the intracurrency common factors suggest weaker integration of economic fundamentals following the Plaza Accord in 1986. However, using a 10-year moving window to examine the 1986–01 period, similar tests show that integration increased between the 1986–95 and 1988–97 periods, but declined again by 1992–01.

Bank capital requirements reduce the probability of bank failure and help mitigate taxpayers’ sharing in the losses that result from bank failures. Under Basel III, direct capital requirements are supplemented with liquidity requirements. Our results suggest that liquidity provisions of banks are connected to bank capital and that changes in liquidity indirectly affect the capital structure of financial institutions. Liquidity appears to be another instrument for adjusting bank capital structure beyond just capital requirements. Consistent with Diamond and Rajan (2005), we find that liquidity and capital should be considered jointly for promoting financial stability.

A majority of U.S. banks between 1973 and 2012 held equity capital significantly beyond the required minimum. We study the risk-return tradeoff in connection with a bank’s capital structure, and identify several new significant market factors that drive the level of equity capital in banks. During normal growth periods, bank leverage is negatively related to a level of competition and loan portfolio diversification, while high bank leverage is associated with low past liquidity. During recessions and expansions, the roles of those factors change following distortions in risk-return tradeoff. In distress, when banks approach regulatory capital requirements, market determinants of book leverage lose their significance; however, leverage does not decrease until a bank is within 1% of the minimal capital threshold.

We examine whether the existence of a bank/firm relationship lowers the cost of public debt financing. Using a sample of first public straight debt offers, we test the cross-monitoring effect of bank debt and Diamond's (1991, Journal of Political Economy, 99, 689–721) reputation-building argument. We find that the existence of bank debt lowers the at-issue yield spreads for first public straight bond offers by about 68 basis points, on average. Consistent with Diamond's reputation-building argument, we document that firm reputation is negatively related to the at-issue yield spread for initial public debt offers.

This study examines the initial-day and aftermarket price performance of corporate straight debt IPOs. We find that IPOs of speculative grade debt are underpriced like equity IPOs, while those rated investment grade are overpriced. IPOs of investment grade debt are typically issued by firms listed on the major exchanges and underwritten by prestigious underwriters. In contrast, junk bond IPOs are more likely to be handled by less prestigious underwriters and are typically issued by OTC firms. Our analysis also reveals that bond rating, market listing of the firm, and investment banker quality are significant determinants of bond IPO returns.

ABSTRACT This study examines the initial‐day and aftermarket price performance of corporate straight debt IPOs. We find that IPOs of speculative grade debt are underpriced like equity IPOs, while those rated investment grade are overpriced. IPOs of investment grade debt are typically issued by firms listed on the major exchanges and underwritten by prestigious underwriters. In contrast, junk bond IPOs are more likely to be handled by less prestigious underwriters and are typically issued by OTC firms. Our analysis also reveals that bond rating, market listing of the firm, and investment banker quality are significant determinants of bond IPO returns.

We investigate stock price reactions to Internet-related name changes in a market downturn. In contrast to the Internet boom period, during which there was a surge of dot.com additions, in the bust period, there is a dramatic reduction in the pace of dot.com additions accompanied by a rapid increase in dot.com name deletions. Following the Internet “crash” of mid-2000, investors react positively to name changes for firms that remove dot.com from their name. This dot.com deletion effect produces cumulative abnormal returns on the order of 64% for the 60 days surrounding the announcement day. Our results add support to a growing body of literature that documents that investors are potentially influenced by cosmetic effects and that managers rationally time corporate actions to take advantage of these biases.