Digests

Leverage and Cash Dynamics
Harry DeAngelo, Andrei S Gonçalves, René M Stulz
Review of Finance, Volume 26, Issue 5, September 2022, Pages 1101–1144, https://doi.org/10.1093/rof/rfac043

The empirical corporate finance literature contains two distinct (and enormous) research silos, one focused on capital structure and the other on cash balances, with interactions between leverage and cash largely ignored.… Read more...

Uniform Mortgage Regulation and Distortion in Capital Allocation
Tim Zhang
Review of Finance, Volume 26, Issue 4, July 2022, Pages 1011–1050, https://doi.org/10.1093/rof/rfab026

The economy in the United States is strongly influenced by local conditions, but some federal pricing policies are often nationally uniform and do not reflect the heterogeneity of local features across geography.… Read more...

Do Credit Rating Agencies Influence Elections
Igor Cunha, Miguel A Ferreira, Rui C Silva
Review of Finance, Volume 26, Issue 4, July 2022, Pages 937–969, https://doi.org/10.1093/rof/rfac039

The long-standing debate about the role of financial markets in society has recently received additional attention due to the 2007-2009 global financial crisis and the 2010-2012 European sovereign debt crisis.… Read more...

A Wake-Up Call Theory of Contagion
Toni Ahnert, Christoph Bertsch
Review of Finance, Volume 26, Issue 4, July 2022, Pages 829–854, https://doi.org/10.1093/rof/rfac025

Financial contagion is an important phenomenon contributing to the spread and severity of financial distress. Forbes (2012) distinguishes four different, but not mutually exclusive, channels of contagion: trade, banks and financial institutions, portfolio investors, and wake-up calls.… Read more...

Advertising Arbitrage
Sergey Kovbasyuk, Marco Pagano
Review of Finance, Volume 26, Issue 4, July 2022, Pages 799–827, https://doi.org/10.1093/rof/rfac019

Professional investors often “talk up their book.” That is, they not only disclose their positions and express opinions, but to back their assertions with data on the allegedly mispriced assets.… Read more...

Economic Policy Uncertainty and the Yield Curve
Markus Leippold, Felix Matthys
Review of Finance, Volume 26, Issue 4, July 2022, Pages 751–797, https://doi.org/10.1093/rof/rfac031

Financial markets respond both acutely and swiftly to unanticipated political events. In times of elevated political uncertainty, safe assets such as government bonds are in high demand by investors.… Read more...

Finance Leases: In the Shadow of Banks
Jeffery (Jinfan) Chang, Ting Yang, Yanping Shi
Review of Finance, Volume 26, Issue 3, May 2022, Pages 721–749, https://doi.org/10.1093/rof/rfab037

Shadow banking involves credit intermediation activities outside the traditional banking system. In contrast to the United States and Europe, where shadow banking activities have been under ever-increasing scrutiny since the 2008 subprime mortgage crisis, China has witnessed tremendous shadow banking growth since that crisis.… Read more...

Do Place-Based Policies Promote Local Innovation and Entrepreneurship?
Xuan Tian, Jiajie Xu
Review of Finance, Volume 26, Issue 3, May 2022, Pages 595–635, https://doi.org/10.1093/rof/rfab029

Technological innovation and entrepreneurial activities are key drivers of a nation’s economic growth. Intensive studies have explored a variety of economic, institutional, and social determinants that could promote innovation and entrepreneurial activities.… Read more...

Investor Attention and Asset Pricing Anomalies
Lei Jiang, Jinyu Liu, Lin Peng, Baolian Wang
Review of Finance, Volume 26, Issue 3, May 2022, Pages 563–593, https://doi.org/10.1093/rof/rfab032

In this paper, Jiang, Liu, Peng, and Wang investigate the relationship between investor attention and financial market anomalies.… Read more...

Mortgage Debt, Hand-to-Mouth Households, and Monetary Policy Transmission
Sumit Agarwal, Yongheng Deng, Quanlin Gu, Jia He, Wenlan Qian, Yuan Ren
Review of Finance, Volume 26, Issue 3, May 2022, Pages 487–520, https://doi.org/10.1093/rof/rfac011

Many countries have witnessed a tremendous increase in house prices fuelled by mortgage debt accumulation, which in turn imposes a substantial financial burden on households.… Read more...