Digests

Does Socially Responsible Investing Change Firm Behavior?
Davidson Heath, Daniele Macciocchi, Roni Michaely, Matthew C. Ringgenberg
Review of Finance, Volume 27, Issue 6, November 2023, Pages 2057–2083, https://doi.org/10.1093/rof/rfad002

Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds.… Read more...

Leasing as a Mitigation of Financial Accelerator Effects
Kai Li, Jun Yu
Review of Finance, Volume 27, Issue 6, November 2023, Pages 2015–2056, https://doi.org/10.1093/rof/rfad004

In this paper, we study the macroeconomic implications of corporate leasing activities.  

Leased capital is extensively used in capital markets and production, but its effects on macroeconomic dynamics have been largely overlooked in the literature on macro models with financial frictions, which assumes that firms don’t have an option to rent capital.… Read more...

The Variance Risk Premium in Equilibrium Models
Geert Bekaert, Eric Engstrom, Andrey Ermolov
Review of Finance, Volume 27, Issue 6, November 2023, Pages 1977–2014, https://doi.org/10.1093/rof/rfad005

We document a strong relation between tails in the variance risk premium and consumption growth distributions, with the variance premium defined as the difference between the option-implied variance (the square of the VIX index) and the physical conditional variance of the S&P500 index.… Read more...

Delegated Learning and Contract Commonality in Asset Management
Michael Sockin and Mindy Z Xiaolan
Review of Finance, Volume 27, Issue 6, November 2023, Pages 1931–1975, https://doi.org/10.1093/rof/rfad011

A salient feature of the asset management industry is that portfolio manager compensation has a similar structure across active mutual funds.… Read more...

Dual Ownership and Risk-Taking Incentives in Managerial Compensation
Tao Chen, Li Zhang, Qifei Zhu
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1823–1857, https://doi.org/10.1093/rof/rfad007

This paper examines how institutional investors’ simultaneous holding of the same firm’s equity and bonds affects the setting of executive compensation.… Read more...

Risk-Taking and Asymmetric Learning in Boom and Bust Markets
Pascal Kieren, Jan Müller-Dethard, Martin Weber
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1743–1779, https://doi.org/10.1093/rof/rfac072

One of the major puzzles in financial economics is the predictably counter-cyclical nature of the equity risk premium.… Read more...

Escaping Air Pollution: Immigrants, Students, and Spillover Effects on Property Prices Abroad
Yuk Ying Chang and Sudipto Dasgupta
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1699–1741, https://doi.org/10.1093/rof/rfac070

Recent studies document that climate and environmental risks are causing major reallocations of capital and labor as people try to reduce exposure to these risks.… Read more...

Trading on Talent: Human Capital and Firm Performance
Anastassia Fedyk and James Hodson
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1659–1698, https://doi.org/10.1093/rof/rfac068

How is technically-skilled human capital reflected in firm performance? We leverage a uniquely detailed employer-employee matched dataset to measure U.S.… Read more...

A Theory of the Nominal Character of Stock Securities
Bernard Dumas and Marcel Savioz
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1615–1657, https://doi.org/10.1093/rof/rfac071

One would expect that stocks are perfect hedges against inflation because stocks are backed by physical assets.… Read more...

Cross-Border Bank Flows and Systemic Risk
G. Andrew Karolyi, John Sedunov and Alvaro G. Taboada
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1563–1614, https://doi.org/10.1093/rof/rfad001

Cross-border bank claims increased from $7.8 trillion in 1995 to a peak of $32.9 trillion in 2007 according to the Bank for International Settlements (BIS, 2009, 2016).… Read more...