Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2013

Do Loan Officers' Incentives Lead to Lax Lending Standards?

Sumit AGARWAL, Itzhak BEN-DAVID
To better understand the role that loan officers’ incentives played in the origins of the financial crisis, we study a controlled field experiment conducted by a large bank. In the experiment, the incentive structure of a subset of small business loan officers was altered from fixed salary to volu...
Keywords: loan officers, default, housing bubble, financial crisis
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Annual Conference

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Corporate Finance

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May 2013

Does Academic Research Destroy Stock Return Predictability?

Jeffrey PONTIFF, David MCLEAN
We study the out-of-sample and post-publication return-predictability of 97 variables that academic studies show to predict cross-sectional stock returns. Portfolio returns are 26% lower out-of-sample and 58% lower post-publication. The out-of-sample decline is an upper bound estimate of data mining...
Keywords: anomalies, arbitrage, limits of arbitrage, Short Selling, predicting stock returns
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Does Corporate Hedging Attract Foreign Investors? Evidence from International Firms

Massimo MASSA, Lei ZHANG
We study how corporate hedging affects the demand of foreign institutional investors. We collect measures of foreign exchange hedging and interest rate hedging for a comprehensive sample of international companies. We document a strongly positive relationship between foreign institutional demand and...
Keywords: hedging, foreign exchange hedging, interest rate hedging, foreign ownership, international institutional investors
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Annual Conference

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Corporate Finance

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May 2013

Family Business Group Expansion through IPOs: The Role of Internal Capital in Financing Growth while Preserving Control

Peter Kien PHAM, Jason ZEIN, Stephanie DASH, Ronald W. MASULIS
Using data from 44 countries, we document a new channel through which a family business group's internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their I...
Keywords: business groups, internal capital markets, Financing Constraints, IPOs
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

Employee Inside Debt and Firm Risk-Taking: Evidence from Employee Deposit Programs in Japan

Yupeng LIN, Takeshi YAMADA, Sudipto DASGUPTA, Zilong ZHANG
Unlike broad-based equity ownership by employees, ownership of company debt by rank-and-file employees has not received much attention. We argue that company debt held by employees in the form of in-company deposits can monitor risk-taking and facilitate risk discovery. Employee deposits have been h...
Keywords: inside debt, risk-taking, employee deposits, agency costs of debt
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