Corporate Finance

This study examines the voting behavior of independent directors of public companies in China from 2004–2012. The unique data at the individual-director level overcome endogeneity in both board formation and proposal selection by allowing analysis based on within-board proposal variation. Career-conscious directors, measured by age and the director's reputation value, are more likely to dissent; dissension is eventually rewarded in the marketplace in the form of more outside directorships and a lower risk of regulatory sanctions.

We develop a tractable incomplete-markets model with an earnings process Y subject to permanent shocks and borrowing constraints. Financial frictions cause the marginal (certainty equivalent) value of wealth W to be greater than unity and decrease with liquidity w=W/Y. Additionally, financial frictions cause consumption to decrease with this endogenously determined marginal value of liquidity. Risk aversion and the elasticity of inter-temporal substitution play very different roles on consumption and the dispersion of w.

This paper examines the contribution of out-of-town second-house buyers to mispricing in the housing market. We show that demand from out-of-town second-house buyers during the mid 2000s predicted not only house-price appreciation rates but also implied-to-actual-rent-ratio appreciation rates, a proxy for mispricing. We then apply a novel identification strategy to address the issue of reverse causality.

This paper investigates financial attention using novel panel data on daily investor online account logins. We find support for selective attention to portfolio information. Account logins fall by 9.5% after market declines. Investors also pay less attention when the VIX volatility index is high. The level of attention and the attention/return correlation are strongly related to investor demographics (gender, age) and financial position (wealth, holdings). Using a new statistical decomposition, we show how aggregate and individual household trading are related to investor attention.

The removal of “conservatism” as a qualitative characteristic from the Conceptual Framework of the IFRS has met with considerable resistance. This paper argues that conservatism has a role in accounting, but not as a qualitative characteristic. Rather, it serves as a defining principle for how accounting is to be done. It is thus central to resolving “recognition” and “measurement” issues in the Conceptual Framework, issues that determine what actually goes into the balance sheet and income statement but issues on which the Framework is particularly weak.

We conduct a first comprehensive empirical study of the bank contingent convertible (CoCo) issues market. Two main findings emerge from our study. First, the impact of CoCo issuance on CDS spreads is negative and statistically significant, indicating that CoCo issuance reduces banksícredit risk. The reduction in CDS spreads is much larger for mandatory conversion (MC) CoCos than for principal write-down (PWD) issues.

People choose where to live and how much to invest in housing. Traditionally, the first decision has been the domain of spatial economics, while the second has been analyzed in finance. Spatial asset pricing is an attempt to combine equilibrium concepts from both disciplines. In the finance context, we show how spatial decisions can be framed as an expanded portfolio problem. Within spatial economics, we identify the consequences of hedging motives for location decisions.

We show that venture capitalists' (VCs) on-site involvement with their portfolio companies leads to an increase in (1) innovation and (2) the likelihood of a successful exit. We rule out selection effects by exploiting an exogenous source of variation in VC involvement: the introduction of new airline routes that reduce VCs' travel times to their existing portfolio companies.