Annual Conference

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Corporate Finance

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May 2014

Financial Flexibility and Corporate Cash Policy

Tao CHEN, Jarrad HARFOLD, Chen LIN
Using variations in local real estate prices as exogenous shocks to corporate financing capacity, we investigate the causal effects of financial flexibility on cash policies of US firms. Building on this natural experiment, we find strong evidence that increases in real estate values lead to smaller...
Keywords: Financial Flexibility, Real Estate Prices, Cash Policy
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Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2014

Global Value Chains and Effective Exchange Rates

Shang-Jin WEI , Nikhil PATEL, Zhi WANG
The real effective exchange rate (REER) is one of the most cited statistics in open-economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within a country partic...
Keywords: Global value chains, REER
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Annual Conference

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Corporate Finance

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May 2014

Restraining Overconfident CEOs through Improved Governance: Evidence from the Sarbanes-Oxley Act

Suman BANERJEE, Mark HUMPHERY-JENNER, Vikram NANDA
The literature posits that some CEO overconfidence benefits shareholders, though high levels may not. We argue adequate controls and independent viewpoints provided by an independent board mitigates the costs of CEO overconfidence. We use the concurrent passage of the Sarbanes-Oxley Act and changes ...
Keywords: Over-Confidence, Over-Investment, risk-taking, Quality of Investment, SOX, firm performance
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2014

How Fast Can the Market Get It? Evidence from Alliance Synergies

Hong ZHANG, Massimo MASSA, Chengwei WANG
We study how financial markets evaluate the synergies generated by alliances. Using the complete set of international alliances over the period 2002-2009, we find that fund managers choose to trade alliance stocks have superior information. Strategies based on fund rebalancing may deliver performanc...
Keywords: Alliances, Mutual Funds, Learning, International finance
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Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2014

Investing Like China

Chong-En BAI, Wen YAO, Qing LIU
There are several facts that we document about the Chinese economy during the last decade in this paper: i) The skill premium in wage has been rising till 2008 but falls afterwards; ii) the aggregate investment rate in China increases from 42% in 2008 to 47% in 2013, among which structure investment...
Keywords: Credit Market Imperfections, Economic growth, Transition, Migration, Abundant Unskilled Labor Supply, Wage Premium
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