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Rating agencies in the face of regulation

Opp, Christian C.; Opp, Marcus M.; Harris, Milton - In: Journal of Financial Economics 108 (2013) 1, pp. 46-61

asset classes. Ratings issued by credit rating agencies serve a dual role: they provide information to investors and are … unsustainable, since the rating agency prefers to facilitate regulatory arbitrage by inflating ratings. Our model relates rating …

Persistent link: https://www.econbiz.de/10010635944

Disclosure and agency conflict: Evidence from mutual fund commission bundling

Edelen, Roger M.; Evans, Richard B.; Kadlec, Gregory B. - In: Journal of Financial Economics 103 (2012) 2, pp. 308-326

This study provides empirical evidence on the role of disclosure in resolving agency conflicts in delegated investment management. For certain expenditures, fund managers have alternative means of payment which differ greatly in their opacity: payments can be expensed (relatively transparent);...

Persistent link: https://www.econbiz.de/10010571670

Why are US firms using more short-term debt?

Custódio, Cláudia; Ferreira, Miguel A.; Laureano, Luís - In: Journal of Financial Economics 108 (2013) 1, pp. 182-212

We show that corporate use of long-term debt has decreased in the US over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than 3 years decreased from 53% in 1976 to 6% in 2008 for the smallest firms but did not decrease for...

Persistent link: https://www.econbiz.de/10011039270

Monitoring and corporate disclosure: Evidence from a natural experiment

Irani, Rustom M.; Oesch, David - In: Journal of Financial Economics 109 (2013) 2, pp. 398-418

Using an experimental design that exploits exogenous reductions in coverage resulting from brokerage house mergers, we find that a reduction in coverage causes a deterioration in financial reporting quality. The effect of coverage on disclosure is more pronounced for firms with weak shareholder...

Persistent link: https://www.econbiz.de/10010678708

Information effect of entry into credit ratings market: The case of insurers' ratings

Doherty, Neil A.; Kartasheva, Anastasia V.; Phillips, … - In: Journal of Financial Economics 106 (2012) 2, pp. 308-330

ratings. We show that a monopolistic CRA pools sellers into multiple rating classes and has partial market coverage. This … standards. We use Standard and Poor's (S&P) entry into the market for insurance ratings previously covered by a monopolist, A ….M. Best, to empirically test the impact of entry on the information content of ratings. The empirical analysis reveals that S …

Persistent link: https://www.econbiz.de/10010593829

The inefficiency of refinancing: Why prepayment penalties are good for risky borrowers

Mayer, Chris; Piskorski, Tomasz; Tchistyi, Alexei - In: Journal of Financial Economics 107 (2013) 3, pp. 694-714

This paper provides a theoretical analysis of the efficiency of prepayment penalties in a dynamic competitive lending model with risky borrowers and costly default. When considering improvements in the borrower's creditworthiness as one of the reasons for refinancing mortgages, we show that...

Persistent link: https://www.econbiz.de/10010635951

Fund Manager Allocation

Fang, Jieyan; Kempf, Alexander; Trapp, Monika - In: Journal of Financial Economics 111 (2014) 3, pp. 661-674

We show that fund families allocate their most skilled managers to market segments in which manager skill is rewarded best. In efficient markets, even skilled managers cannot generate excess returns. In less efficient markets, skilled managers can exploit inefficiencies and generate higher...

Persistent link: https://www.econbiz.de/10010743554

Motivating innovation in newly public firms

Baranchuk, Nina; Kieschnick, Robert; Moussawi, Rabih - In: Journal of Financial Economics 111 (2014) 3, pp. 578-588

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early...

Persistent link: https://www.econbiz.de/10010743555

Does it matter who pays for bond ratings? Historical evidence

Jiang, John; Harris Stanford, Mary; Xie, Yuan - In: Journal of Financial Economics 105 (2012) 3, pp. 607-621

We test whether Standard and Poor's (S&P) assigns higher bond ratings after it switches from investor-pay to issuer …'s charges issuers, S&P's ratings are lower than Moody's. Once S&P adopts issuer-pay, its ratings increase and no longer differ … from Moody's. More importantly, S&P only assigns higher ratings for bonds that are subject to greater conflicts of interest …

Persistent link: https://www.econbiz.de/10010617604

Predicting fraud by investment managers

Dimmock, Stephen G.; Gerken, William C. - In: Journal of Financial Economics 105 (2012) 1, pp. 153-173

We test the predictability of investment fraud using a panel of mandatory disclosures filed with the SEC. We find that disclosures related to past regulatory and legal violations, conflicts of interest, and monitoring have significant power to predict fraud. Avoiding the 5% of firms with the...

Persistent link: https://www.econbiz.de/10010571668

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