Forthcoming Articles

Public Attention to Gender Equality and Board Gender Diversity

Mariassunta Giannetti and Tracy Yue Wang

We document that heightened public attention to gender equality is associated with an increase in board gender diversity. Improvements in diversity are more pronounced in firms with a corporate culture that is already sympathetic to gender equality. When public attention to gender equality increases, firms reach out to a larger pool of women, such as women without industry experience or outside their network, but female director appointments do not appear to be dilutive of the board’s skills. Instead, we observe less reliance on connections for director appointments and a decrease in the propensity to appoint connected men.

Does Sunlight Kill Germs? Stock Market Listing and Workplace Safety

Claire Liang; Yaxuan Qi, Rengong (Alex) Zhang, and Haoran Zhu

This study highlights the positive impact of a stock market listing on workplace safety. We find that workplace injuries in publicly listed firms are lower than those in comparable private firms, and this effect relates to heightened monitoring by the media and regulators. The media pays more attention to public firms’ safety issues than to those of private firms, and the reduced media scrutiny due to local newspaper closures leads to greater increases in injuries in public firms. Regulators also monitor public firms more strictly, evidenced by a higher likelihood of nonroutine inspections and larger penalties for detected violations.

Speed and Expertise in Stock Picking: Older, Slower, and Wiser?

Romain Boulland, Chayawat Ornthanalai, and Kent Womack

There are significant differences among sell-side analysts in how frequently they revise recommendations. We show that much of this variation is an analyst-individual trait. Analysts who change their recommendations more slowly make recommendations that are more influential and generate better portfolio returns. Slower-revising analysts tend to change recommendations following corporate news that are harder to interpret by non-stock experts, and our evidence suggests that their investment value derives from their ability to better interpret hard-to-assess information. On average, analysts change recommendations less frequently as their career progresses; however, recommendation speed-style is the dominant predictor of their recommendation value.

CEO Selection and Executive Appearance

Douglas O. Cook  and Shawn Mobbs

Survey assessments have found limited evidence of benefits of executive attractiveness. We use an objective measure of facial attractiveness that is correlated with survey assessments but less noisy and identify several benefits from executive facial attractiveness previously found in the general population but heretofore empirically elusive among executives. We examine the effect of both measures on executive compensation, promotion to CEO and the corresponding shareholder reaction, and promotion to board chair. The objective measure identifies significantly positive labor market effects for executive attractiveness in all outcomes in contrast to survey assessments of attractiveness that do not correlate with any outcome.

Fragmentation and Strategic Market-Making

Laurence Daures Lescourret and Sophie Moinas

How does trading in one venue affect the quoting strategies of market-makers in other venues? We develop a two-venue imperfect competition model in which market-makers face quadratic costs to absorb shocks. Non-constant marginal costs imply that absorbing a shock in one venue simultaneously changes marginal costs in all other venues. Moreover, market-makers strategically choose which shock(s) to absorb. These two forces may intensify competition, leading to enhanced liquidity. Using Euronext proprietary data, we track individual best bid and ask quotes of intermediaries in each venue. We uncover evidence of strategic cross-market quoting behavior which is uniquely predicted by our model.

Foreign Ties That Bind: Cross-Border Firm Expansions and Fund Portfolio Allocation Around the World

Fariborz Moshirian, Peter Pham, Shu Tian, and Eliza Wu

We investigate whether international operations enhance information links between firms and foreign investors. Exploiting novel subsidiary-level data and within-location variations, we show that, after expanding into another country, a firm attracts greater investment allocation from funds from that country than from other foreign funds. This increase is economically significant, equivalent to one-fifth of the average firm weight in a country-specific portfolio. The observed effect cannot be attributed to funds’ influence, persists even when funds are already familiar with the firm, and helps them generate superior risk-adjusted returns. Our results suggest that firms’ cross-border economic activities contribute to global financial interconnectedness.

Recovery with Applications to Forecasting Equity Disaster Probability and Testing the Spanning Hypothesis in the Treasury Market

Gurdip S. Bakshi, Xiaohui Gao, and Jinming Xue

We investigate the implications of recovering real-world conditional expectation of return functions using options on the S&P 500 index and Treasury bond futures. First, we construct estimates of the probability of disasters, defined as higher than 6%, 5%, or 4% equity market declines over option expiration cycles. This measure of disaster probability forecasts realized disasters. Second, we employ options on the futures of the 10- and 30-year Treasury bonds to construct estimates for the expected return of bond futures. These measures display forecasting ability for subsequent futures returns beyond the level, slope, and curvature variables extracted from the yield curve.

Foreign Acquisition and Credit Risk: Evidence from the U.S. CDS Market

Umit Yilmaz

This paper empirically analyzes the effect of foreign block acquisitions on U.S. target firms’ credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms’ CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers.

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