A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

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  • Valta, P. (2012). Competition and the Cost of Debt. Journal of Financial Economics, 105, 661–682.

    This paper empirically shows that the cost of bank debt is systematically higher for firms that operate in competitive product markets. Using various proxies for product market competition, and reductions of import tariff rates to capture exogenous changes to a firm's competitive environment, I find that competition has a significantly positive effect on the cost of bank debt. Moreover, the analysis reveals that the effect of competition is greater in industries in which small firms face financially strong rivals, in industries with intense strategic interactions between firms, and in illiquid industries. Overall, these findings suggest that banks price financial contracts by taking into account the risk that arises from product market competition.

    View on www.sciencedirect.com
  • Vayanos, D., & Wang, J. (2012). Liquidity and Asset Returns Under Asymmetric Information and Imperfect Competition. Review of Financial Studies, 25, 1339–1365.

    We analyze how asymmetric information and imperfect competition affect liquidity and asset prices. Our model has three periods: Agents are identical in the first, become heterogeneous and trade in the second, and consume asset payoffs in the third. We show that asymmetric information in the second period raises ex ante expected asset returns in the first, comparing both to the case where all private signals are made public and to that where private signals are not observed. Imperfect competition can instead lower expected returns. Each imperfection can move common measures of illiquidity in opposite directions.

    View on hdl.handle.net
  • Wang, C., Wang, N., & Yang, J. (2012). A Unified Model of Entrepreneurship Dynamics. Journal of Financial Economics, 106, 1–23.

    We develop an incomplete-markets q-theoretic model to study entrepreneurship dynamics. Precautionary motive, borrowing constraints, and capital illiquidity lead to underinvestment, conservative debt use, under-consumption, and less risky portfolio allocation. The endogenous liquid wealth-illiquid capital ratio w measures time-varying financial constraint. The option to accumulate wealth before entry is critical for entrepreneurship. Flexible exit option is important for risk management purposes. Investment increases and the private marginal value of liquidity decreases as w decreases and exit becomes more likely, contrary to predictions of standard financial constraint models. We show that the idiosyncratic risk premium is quantitatively significant, especially for low w.

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  • Wermers, R., Yao, T., & Zhao, J. (2012). Forecasting Stock Returns Through an Efficient Aggregation of Mutual Fund Holdings. Review of Financial Studies, 25, 3490–3529.

    We develop a stock return–predictive measure based on an efficient aggregation of the portfolio holdings of all actively managed U.S. domestic equity mutual funds, and use this model to study the source of fund managers' stock selection abilities. This "generalized inverse alpha" (GIA) approach reveals differences in the ability of managers to predict firms' future earnings from fundamental research. Notably, the GIA's return-forecasting power is not subsumed by publicly available quantitative predictors, such as momentum, value, and earnings quality, nor is it subsumed by methods shown in past research to forecast stock returns using fund holdings or trades.

    View on hdl.handle.net
  • Xu, J. (2012). Profitability and Capital Structure Evidence from Import Penetration. Journal of Financial Economics, 106, 427–446.

    Firms experiencing increases in import competition significantly reduce their leverage ratios by issuing equity and selling assets to repay debt. Using import tariffs and foreign exchange rates as instrumental variables for import penetration, I show that these results are not manifestations of endogenous relations between import competition and leverage. The results are consistent with traditional trade-off models of capital structure that predict a positive relation between book leverage and expected future profitability. Further evidence suggests that import competition affects leverage through changes in the trade-off between the tax benefits of debt and the costs of financial distress.

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  • Zhu, H. (2012). Finding a Good Price in Opaque Over-the-Counter Markets. Review of Financial Studies, 25, 1255–1285.

    This article offers a dynamic model of opaque over-the-counter markets. A seller searches for an attractive price by visiting multiple buyers, one at a time. The buyers do not observe contacts, quotes, or trades elsewhere in the market. A repeat contact with a buyer reveals the seller's reduced outside options and worsens the price offered by the revisited buyer. When the asset value is uncertain and common to all buyers, a visit by the seller suggests that other buyers could have quoted unattractive prices and thus worsens the visited buyer's inference regarding the asset value.

    View on hdl.handle.net
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Last update from database: 5/15/24, 11:01 PM (AEST)