Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2016

Co-Collateral Risk

Hong ZHANG, Massimo MASSA, Chengwei WANG
This paper proposes a novel measure of stock-level margin constraints to study the impact of funding risk on the cross-section of stock returns. More specifically, we use daily cash collateral information collected from the short selling market to construct the measure, and decompose it into two com...
Keywords: Funding risk, Collateral, Short-selling, Stock Returns
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Annual Conference

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Investment Finance

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May 2016

Anomalies and News

Joseph ENGELBERG, R. David MCLEAN, Jeffrey PONTIFF
Using a sample of 97 stock return anomalies, we find that anomaly returns are 50% higher on corporate news days and are 6 times higher on earnings announcement days. These results could be explained by dynamic risk, mispricing via biased expectations, and data mining. We develop and conduct unique t...
Keywords: News, anomalies, Cross-sectional return predictability, earnings announcements, market efficiency
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Annual Conference

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Corporate Finance

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May 2016

Enemy at the Gates: Trade Credit v/s Price Discount as a Strategic Tool

Manpreet SINGH
How do financial constraints affect an incumbent supplier firm's choice of extending more trade credit versus offering price discounts when facing an increased threat of entry from competitors? The threatened incumbent supplier firms may (a) extend more trade credit, ex-ante, to defend their market ...
Keywords: trade credit, limit-pricing, entry threat, Financial constraints
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2016

Shareholder Wealth Consequence of Insider Pledging of Company Stock as Collateral for Personal Loans

Jason ZEIN, Ying DOU, Ronald W. MASULIS
We study a widespread yet under-explored corporate governance phenomenon: the pledging of company stock by insiders as collateral for personal bank loans. Utilizing a regulatory change that exogenously decreases pledging, we document a negative causal impact of pledging on shareholder wealth. We stu...
Keywords: Pledging, Managerial incentive, Downside risk, risk-taking, Payout policy
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Annual Conference

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Corporate Finance

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May 2016

Inside Brokers

Frank Weikai LI, Abhiroop MUKHERJEE, Rik SEN
We identify the stock broking house that firm's insiders trade through, and show that analysts employed at such “inside brokers” have a distinct information advantage over other analysts, even after the trade is publicly disclosed. This advantage of the “inside analyst” is stronger for firms...
Keywords: Insiders, Brokers, Analysts, Information Transmission
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