VIX futures prices rose slowly in late February and early March 2020 as the COVID-19 pandemic took hold. Futures price premiums, defined as futures prices minus real-time statistical forecasts of future VIX values, turned sharply negative and remained negative until mid-April. Trading strategies based on estimated premiums profited from the subsequent increase in market volatility and equity market crash. The underreaction of futures prices to growing pandemic risks poses a puzzle for standard asset pricing models. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

We reexamine the post-listing puzzle by studying the stock performance of 2103 firms that moved from NASDAQ to NYSE or AMEX, or from AMEX to NYSE during 1973–1999. The matched four-factor regressions demonstrate that the listing firms do not underperform. Size-and-book-to-market matched factor regression finds that the “post-listing drift” is confined to the small set of firms moving from NASDAQ to AMEX during 1981–1990, within size deciles 3–6 and book-to-market quintiles 1–3. A further control of the industry effect is able to resolve the remaining abnormal returns. Our results are consistent with the pseudo market timing hypothesis in Schultz, (2003) [Schultz, P., 2003. Pseudo market timing and the long-run underperformance of IPOs. J. Fin. 58, 483–517.].

We examine the impact of information asymmetry on a firm's capital structure decisions with a unique information rating scheme that draws from 114 measures over five dimensions of information disclosures on each firm from 2006 to 2012. We find that a firm with high (low) information rating is related to low (high) debt financing and leverage. In particular, a firm that moves from the lowest to the highest information rating experiences a 7.8% reduction in firm leverage on average. This relationship is robust to firm characteristics, incentive conflicts, and the agreement theory of Dittmar and Thakor (2007). Our results suggest that information asymmetry is influential on a firm's pecking order behavior independent of these effects.

ABSTRACT This study provides evidence on the role of public firms’ financial reports in the state‐bond secondary market. I investigate the informational role of corporate earnings announcements and find that public firms’ monthly earnings signals aggregated to the state level are positively associated with contemporaneous state‐bond returns. Further analyses reveal that public firms’ earnings announcements predict traditional economic indicators and contain incremental information that is independent of the traditional economic indicators. In cross‐sectional analyses, I show that the earnings–returns relation is especially pronounced when bondholders face longer investment horizons and higher credit risks. Taken together, the evidence indicates a positive externality of corporate financial reports in alleviating the opacity in the municipal bond secondary market.

This study examines the impact of the presence of institutional dual‐holders, whose portfolios hold both loans and equity securities of the same firms, on those firms' voluntary disclosures. Using mergers between institutional shareholders and lenders to the same firms as exogenous shocks to identify firms with institutional dual‐holders that have high relative equity ownership, we document that such firms are less likely to provide management forecasts and disclose fewer voluntary 8‐K items. In cross‐sectional analyses, we find that the reduction in voluntary disclosures is more pronounced when institutional dual‐holders have higher board representation and when firms have lower litigation risk. In addition, we find that firms with institutional dual‐holders provide more private disclosures to their lenders via loan contract covenants. Additional analyses indicate that the impact of institutional dual‐holders on corporate disclosures is driven by both their monitoring and trading incentives.

Ex ante estimates of the volatility premium embedded in VIX futures, known as the VIX premium, fall or stay flat when ex ante measures of risk rise. This is not an artifact of mismeasurement: (i) ex ante premiums reliably predict ex post returns to VIX futures with a coefficient near one, and (ii) falling ex ante premiums predict increasing ex post market and investment risk, creating profitable trading opportunities. Falling hedging demand helps explain this behavior, as premiums and trader exposures tend to fall together when risk rises. These facts provide a puzzle for theories of why investors hedge volatility. Received January 13, 2017; editorial decision April 26, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

A key aspect of Chinese-style institutions is that the growth of the economy can be severely restricted by the adjustment and implementation of policy, leading to serious uncertainty in business practices. This paper investigates whether political connections help private firms obtain policy information ahead of public disclosure that would allow them to hedge against policy uncertainty. Using the quarterly data on non-financial private listed companies over 2007:Q1–2017:Q4, we find that the negative effect of policy uncertainty on fixed-asset investment is lower in politically connected firms than in non-connected firms, especially in industries with low asset reversibility and regions with a high degree of marketization. Further, a positive mitigation of policy uncertainty exists in firms whose top executives served as officials rather than deputies, and higher administrative as well as finance-related political connections show more information advantage. In addition, robust evidence is provided that controls the impacts of political connections on financing constraints, business performance and policy burdens, overcoming potential endogeneity, and the cash-holdings perspective. Our findings suggest that political connections are conducive to mitigate information asymmetry between private firms and policymakers in China.

ABSTRACT We find that firms are less likely to report an internal control material weakness (as mandated by the Sarbanes‐Oxley Act) in a given year if one of their audit committee members is concurrently on the board of a firm that disclosed a material weakness within the prior three years. We find a similar spillover effect for financial restatement disclosures. The spillover from material weakness disclosures is evident only if a shared director has more experience with the disclosing firm or can channel more information about the disclosed material weakness. Our findings suggest that prior director experiences outside the firm influence the work of audit committees inside the firm. One rationale is that a director's prior experience with an adverse disclosure helps diffuse important insights and serves as a catalyst for improvements in a firm's internal control and financial reporting practices. An alternative explanation, which we cannot dismiss, holds that a director's prior experience helps a firm to underreport material weaknesses and financial restatements without any attendant improvements in the underlying practices.

There is mixed evidence on whether the marginal dollar spent on corporate social responsibility is due to agency problems. We propose an approach by modeling how the 2003 dividend tax cut, which increased after-tax insider ownership and better aligned managerial and shareholder interests, affected the marginal dollar spent on firm responsibility. We confirm key predictions of our agency model: following the tax cut, moderate insider-ownership firms experience larger declines in their responsibility ratings and increases in their valuations relative to other firms. We also confirm another implication regarding managerial misalignment using a regression-discontinuity design of close votes on shareholder-governance proposals. (JEL G30, G31, G35) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.