RCFS News

Here is an interesting fact that spans corporate finance and asset pricing: among U.S. public firms, innovation is mostly concentrated in a very small group of large corporations, and innovation “leaders” experience lower systematic risk than the “laggards.” Jan Bena and Lorenzo Garlappi, in their paper “Corporate Innovation and Returns,” investigate this fact by, first, proposing a winner-takes-all patent-race model, and then empirically showing that a firm’s expected return decreases… Read More »Paper Spotlight: Corporate Innovation and Returns

We are living through a pandemic-induced recession that has slashed many firms’ cash flows with a consequent negative impact on both employment and wage levels. Firms, fighting for survival, will be pressed to cut costs, and wages are an important budget line for the vast majority of firms. At the same time, workers are important assets for firms’ survival and prosperity. What are the effects of paying higher wages on… Read More »Paper Spotlight: Wages and Firm Performance: Evidence from the 2008 Financial Crisis

“Competition for Flow and Short-Termism in Activism” by Mike Burkart and Amil Dasgupta

              The COVID-19 pandemic, with its heavy toll on human lives, unemployment, and financial distress, should be considered as an important acid test for firms’ professed investments in their responsibility toward society. It is during such times that we can better understand how to interpret the Environmental, Social, and Governance (ESG) scores, standard proxies for firms’ corporate social responsibility, and what is really driving… Read More »Paper Spotlight: Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

Our publisher, Oxford University Press, has pledged to make content related to COVID-19 freely accessible online. The Review of Asset Pricing Studies and The Review of Corporate Finance Studies have forthcoming special issues on COVID-19. These papers will be freely accessible online as part of OUP’s collection. You can read these papers as they become available on advance access (RAPS) and advance access (RCFS).

The determinants of executive compensation packages are fraught with empirical difficulties due to unobserved firm-level, CEO-level, and assortative matching characteristics. In the paper “Managerial Attributes, Incentives, and Performance,” just published in the August 2020 issue (Volume 9, Issue 2), Jeff Coles and Frank Li examine the relative importance of observable and unobservable firm- and manager-specific characteristics in determining two fundamental attributes of executive incentives, delta and vega. They find that… Read More »Paper Spotlight: Managerial Attributes, Incentives, and Performance

“The Macroeconomics of Corporate Debt” by Markus K. Brunnermeier  and Arvind Krishnamurthy “The risk of being a fallen angel and the corporate dash for cash in the midst of COVID” by Viral Acharya and Sascha Steffen “The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy” by Elena Carletti, Tommaso Oliviero, Marco Pagano, Loriana Pelizzon, and Marti G. Subrahmanyam

In the RCFS blog, Professor Ellul discusses Boris Vallée‘s paper “Banks’ Contingent Capital Trigger Effects,” which won the RCFS’s 2020 Rising Scholar Award. Vallée finds that liability management exercises, a type of contingent capital trigger used by banks, are effective at improving banks’ capitalization levels. This finding is particularly important during the COVID-19 pandemic, when economic downturn is likely to put pressure on banks. Read the full post on the blog.

The Editor’s Choice paper for 9(2) is “Banks’ Non-interest Income and Systemic Risk” by Markus K. Brunnermeier, Gang Nathan Dong, and Darius Palia. You can read the paper free online.

              The impact of COVID-19 has driven many firms into financial distress, and policymakers around the world have responded with various emergency measures to support the business sector. While the immediate priority has been to get support out quickly to firms, over time more active decisions will have to be made on which firms should be supported. A potential danger that arises is that… Read More »Paper Spotlight: Identifying the Real Effects of Zombie Lending