Knowledge that Transforms

manuscripts in process at the beginning of the year, plus new submissions, plus resubmissions).In general, this number has grown along with the increase in submissions.Column (e) of Table 1 reports the number of decision letters issued each year. 2 Commensurate with the increase in new submissions during 2018 reported in column (b) and the modest decrease in resubmissions reported in column (c), column (e) shows that the number of decision letters grew by 5.5% in 2018, from 1,113 to 1,174.Thus, driven by the growth in submissions in recent years, the number of submission letters by TAR editors also is at historically high levels.

Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Facebook Twitter LinkedIn MailTo Tools Icon Tools Get Permissions Search Site Cite View This Citation Add to Citation Manager Citation Feng Gu; Capitalism without Capital. The Accounting Review 1 July 2018; 93 (4): 359–363. https://doi.org/10.2308/accr-10586 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentThe Accounting Review Search Advanced Search

Pressure from institutional money managers to generate profits in the short run is often blamed for corporate myopia. Theoretical research suggests that money managers' short term focus stems from their career concerns and greater fund transparency can amplify these concerns. Using a difference-in-differences design around a regulatory shock that increased transparency about fund managers' portfolio choices, we examine whether increased transparency encourages myopic corporate investment behavior. We find that corporate innovation declines following the regulatory shock. Moreover, evidence from mutual fund trading behavior corroborates that these results are driven by increased short-term focus of money managers.

We develop a three-factor no-arbitrage model for valuing mortgage-backed securities in which we solve for the implied prepayment function from the cross-section of market prices. This model closely fits the cross-section of mortgage-backed security prices without needing to specify an econometric prepayment model. We find that implied prepayments are generally higher than actual prepayments, providing direct evidence of significant macroeconomic-driven prepayment risk premiums in mortgage-backed security prices. We also find evidence that mortgage-backed security prices were significantly affected by Fannie Mae credit risk and the Federal Reserve’s quantitative easing programs. Received May 10, 2016; editorial decision September 22, 2017 by Editor Stijn Van Nieuwerburgh.

This paper uses new data from the PSID to quantify the relative importance of negative equity versus ability to pay, in driving mortgage defaults between 2009 and 2013. These data allow us to construct household budgets sets that provide better measures of ability to pay. Changes in ability to pay have large estimated effects. Job loss has an equivalent effect on the propensity to default as a 35% decline in equity. Strategic motives are also found to be quantitatively important, as we estimate more than 38% of households in default could make their mortgage payments without reducing consumption.

Standard option valuation models leave no room for option illiquidity premia. Yet we find the risk-adjusted return spread for illiquid over liquid equity options is 3.4% per day for at-the-money calls and 2.5% for at-the-money puts. These premia are computed using option illiquidity measures constructed from intraday effective spreads for a large panel of U.S. equities, and they are robust to different empirical implementations. Our findings are consistent with evidence that market makers in the equity options market hold large and risky net long positions, and positive illiquidity premia compensate them for the risks and costs of these positions.

We study whether stocks are riskier or safer in the long run from the perspective of Bayesian investors who employ the long-run risk, habit formation, or prospect theory models to form prior beliefs about return dynamics. Economic theory delivers important guidance for long-run investment opportunities. Specifically, incorporating prior information from the habit formation or prospect theory models reinforces beliefs in mean reversion and inferences that stocks are safer over longer horizons. Conversely, investors with long-run risk priors perceive weaker mean reversion and riskier equities. Model-based information is particularly important for inferences about uncertainty in the dividend growth component of returns. Received May 18, 2016; editorial decision April 25, 2017 by Editor Stijn Van Nieuwerburgh.

Credit default swaps can be used to lower the capital requirements of dealer banks entering into uncollateralized derivatives positions with sovereigns. We show in a model that the regulatory incentive to obtain capital relief makes CDS contracts valuable to dealer banks and empirically that, consistent with the use of CDS for regulatory purposes, there is a disconnect between changes in bond yield spreads and in CDS premiums, especially for safe sovereigns. Additional empirical tests related to the volume of contracts outstanding, effects of regulatory proxies, and the corporate bond and CDS markets support that CDS contracts are used for capital relief. (