A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 108 resources
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We propose a new method to estimate the bid-ask spread when quote data are not available. Compared to other low-frequency estimates, this method utilizes a wider information set, namely, readily available close, high, and low prices. In the absence of end-of-day quote data, this method generally provides the highest cross-sectional and average time-series correlations with the TAQ effective spread benchmark. Moreover, it delivers the most accurate estimates for less liquid stocks. Our estimator has many potential applications, including an accurate measurement of transaction cost, systematic liquidity risk, and commonality in liquidity for U.S. stocks dating back almost one century.
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Dividend payouts erode equity capital and affect the relative value of claims on a bank. Through this channel, when banks have contingent claims on each other, one bank’s capital policy affects the equity value and risk of default for other banks. When such externalities are strong, bank capital becomes a public good, whereby the private equilibrium features excessive dividends and inefficient recapitalization relative to the efficient policy that maximizes total banking sector equity. We relate these implications to the observed bank behaviour during the crisis of 2007–2009.
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We present an economic model of systemic risk in which undercapitalization of the financial sector as a whole is assumed to harm the real economy, leading to a systemic risk externality. Each financial institution’s contribution to systemic risk can be measured as its systemic expected shortfall (SES), that is, its propensity to be undercapitalized when the system as a whole is undercapitalized. SES increases in the institution’s leverage and its marginal expected shortfall (MES), that is, its losses in the tail of the system’s loss distribution. We demonstrate empirically the ability of components of SES to predict emerging systemic risk during the financial crisis of 2007–2009.
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We show that municipalities’ financial constraints can have a significant impact on local employment and growth. We identify these effects by exploiting exogenous upgrades in U.S. municipal bond ratings caused by Moody’s recalibration of its ratings scale in 2010. We find that local governments increase expenditures because their debt capacity expands following a rating upgrade. These expenditures have an estimated local income multiplier of 1.9 and a cost per job of $20,000 per year. Our findings suggest that debt-financed increases in government spending can improve economic conditions during recessions.
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We propose an amplification mechanism of financial crises based on the information choices of investors. Information acquisition makes investors more likely to act against their prior. Deteriorating public news under an initially strong (weak) prior increases (reduces) the value of private information and induces more (less) information acquisition. Deteriorating public news increases the probability of a crisis, since the initially strong (weak) prior induces no attacks (attacks). This effect is amplified with endogenous information choices. To enhance financial stability, a policy maker affects information acquisition via taxes and subsidies. We derive and discuss testable implications for the magnitude of amplification.
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Purchase obligations are forward contracts with suppliers and are used more broadly than traded commodity derivatives. This paper is the first to document that these contracts are a risk management tool and have a material impact on corporate hedging activity. Firms that expand their risk management options following the introduction of steel futures contracts substitute financial hedging for purchase obligations. Contracting frictions, such as bargaining power and settlement risk, as well as potential hold-up issues associated with relationship-specific investment, affect the use of purchase obligations in the cross-section, as well as how firms respond to the introduction of steel futures.
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The unique regulation of U.S. public pension funds links their liability discount rate to the expected return on assets, which gives them incentives to invest more in risky assets in order to report a better funding status. Comparing public and private pension funds in the United States, Canada, and Europe, we find that U.S. public pension funds act on their regulatory incentives. U.S. public pension funds with a higher level of underfunding per participant, as well as funds with more politicians and elected plan participants serving on the board, take more risk and use higher discount rates. The increased risk-taking by U.S. public funds is negatively related to their performance.
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We study how institutions influence start-up characteristics of firms and how these characteristics predict entrants’ growth trajectories over the early firm life cycle. Using census data from India, we find that greater financial development is associated with higher entry rates and smaller-sized entrants. Following entry, however, large and small entrants grow at the same rates across states with different institutions or industries with differing reliance on external finance. The impact of access to finance is greater on start-up size and entry rates than on the subsequent growth of firms during the early life cycle.
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We study the effect of a bond’s place in its issuer’s maturity structure on credit risk. Using a structural model as motivation, we argue that bonds due relatively late in their issuers’ maturity structure have greater credit risk than do bonds due relatively early. Empirically, we find robust evidence that these later bonds have larger yield spreads and greater comovement with equity and that the magnitude of the effects is consistent with model predictions for investment-grade bonds. Our results highlight the importance of bond-specific credit risk for understanding corporate bond prices.
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We develop and estimate a tractable equilibrium term structure model populated with rational but heterogeneously informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices. The speculative motive is an important driver of trading volume. Yield dynamics due to speculation are (1) statistically distinct from classical term structure components due to risk premiums and expectations about future short rates and are orthogonal to public information available to traders in real time and (2) quantitatively important, accounting for a substantial fraction of the variation of long maturity U.S. bond yields.
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- Bond (13)
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- Mergers and Acquisitions (1)
- Capital Structure (1)
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- Journal Article (108)