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Department of Finance Finance Down Under Building on the Best from the Cellars of Finance March 6-8, 2014 Department of Finance Finance Down Under Building on the Best from the Cellars of Finance March 6-8, 2014 Organized by Department of Finance Faculty of Business and Economics The University of Melbourne Welcome to Finance Down Under (FDU) 2014 The Department of Finance in the Faculty of Business and Economics at the University of Melbourne welcomes everyone to its annual Finance Down Under conference. Submissions again reached record levels in both quantity and quality. Out of several hundred submissions, only twenty papers were selected to the final program. These twenty papers from all areas in finance (Asset Pricing, Investments, and Corporate Finance) received high ratings from the Program Committee, and we have academics from leading universities in the U.S., Europe, Asia, and Australia providing discussions on the accepted papers. Our unique format includes a special symposium built around ‘vintage’ work in finance that has withstood the test of time and continued to inspire current research. This year, we have selected two papers for the special session in honour of Myers and Majluf’s classic paper “Corporate financing and investment decisions when firms have information that investors do not have”. In addition, our keynote speakers— Paolo Fulghieri, Ron Giammarino, and Stewart Myers, our guests of honour—will speak about the impact of the seminal work and related topics. Finance Down Under 2013 Building on the Best from the Cellars of Finance 1 FINANCE DOWN UNDER 2014: Building on the Best from the Cellars of Finance PROGRAM SUMMARY Thursday, March 6, 2014 (Melbourne Cricket Ground) 6:00 pm – 8:00 pm Wine Reception (Jack Ryder Room) Welcome Speech: John Handley, University of Melbourne Keynote Speech: Ron Giammarino, University of British Columbia Friday, March 7, 2014 (Melbourne Law School: Woodward Centre, Level 10) 9:30 am – 10:10 am Registration and Morning Coffee (Registration Desk) 10:10 am – 10:45 am Keynote Speech: Stewart C. Myers, MIT Sloan School of Management 10:45 am – 11:15 am Coffee Break 11:15 am – 12:25 pm Parallel Sessions I (Conference Rooms) 12:25 pm – 2:00 pm Lunch (Dining Room) 2:00 pm – 3:10 pm Parallel Sessions II (Conference Rooms) 3:10 pm – 3:30 3:45pm pm Afternoon Tea 3:30pm pm – 4:40 3:45 4:55pm pm Parallel Sessions III (Conference Rooms) 6:00 pm – 8:00 9:00pm pm Wine Reception (Eureka 89 - Level 89 Eureka Tower, 7 Riverside Quay) Theatre,-Level Saturday, March 8, 2014 (The Spot Building: Basement Theatre Level B1) B1) 9:00 am – 10:00 am Finance Honours Breakfast 10:00 am – 10:35 am Keynote Speech: Paolo Fulghieri, University of North Carolina 10:35 am – 11:45 am Special Session 12:00 pm – 10:00 pm 9:00 pm Food and Wine Experience (Mornington Peninsula) Best Paper Award and Announcement: John Handley, University of Melbourne 2 Finance Down Under 2014 Building on the Best from the Cellars of Finance Parallel Sessions I March 7, 11:15 am – 12:25 pm Parallel Sessions II March 7, 2:00 pm – 3:10 pm Parallel Sessions III March 7, 3:30 3:45 pm – 4:40 4:55 pm Woodward Conference Room A Woodward Conference Room B Woodward Conference Room C Bondage Bonding Risk Information: Control vs. Chaos? Institutional Investors & Governance Local Currency Sovereign Risk Corporate News Releases and Equity Vesting Savers and Spenders: Fiscal Policy as a Potential Resolution to the Treasury Bond Premium Puzzle Portfolio Manager Compensation in the U.S. Mutual Fund Industry Redacting Information at the Initial Public Offering Firms in Asset Pricing Dividend Policy , Investment, and Stock Returns Coming, Going, or Staying? CEO Tournaments: A CrossCountry Analysis of Causes, Cultural Influences, and Consequences Capital Gains Lock-in and Governance Choices Networks or Crowds? Hedge Fund Crowds and Mispricing Does it Pay to Stay? An Examination of Long-Term Advisor Relationships The Convergence and Divergence of Investors’ Opinions around Earnings News: Evidence from a Social Network New Assets for Pricing Claims in Conflict Tricks of the Trading The Financialization of Storable Commodities Debt Renegotiation and Investment Decisions Across Countries Volatility Risks and Growth Options Risk Premia in Gold Lease Rates Dual Ownership, Returns, and Voting in Mergers A Simple Multimarket Measure of information Asymmetry Trading Fast and Slow: Colocation and Market Quality Special Session: Symposium (The Spot, Basement Theatre) March 8, 10:35 am – 11:45 am Does Group Affiliation Facilitate Access to External Financing? Evidence from IPOs by Family Business Groups Financial Flexibility and Corporate Cash Policy Finance Down Under 2014 Building on the Best from the Cellars of Finance 3 4 PROGRAM DETAILS FRIDAY, March 7, 2014, 11:15 am – 12:25 pm Bonding Bondage Risk Risk – Woodward Conference Room A Session Chair: Liheng Xu, University of Melbourne Local Currency Sovereign Risk Wenxin Du, Federal Reserve Board Jesse Schreger, Harvard University Savers and Spenders: Fiscal Policy as a Potential Resolution to the Treasury Bond Premium Puzzle Alex C. Hsu, Georgia Institute of Technology Discussants: Gregory Bauer, Bank of Canada Michael F. Gallmeyer, University of Virginia Information: Control vs. Chaos? – Woodward Conference Room B Session Chair: Lyndon Moore, University of Melbourne Corporate News Releases and Equity Vesting Alex Edmans, London Business School, Wharton, NBER, CEPR and ECGI Luis Goncalves-Pinto, National University of Singapore Yanbo Wang, INSEAD Moqi Xu, London School of Economics Redacting Information at the Initial Public Offering Audra L. Boone, Texas A&M University Ioannis V. Floros, Iowa State University Shane A. Johnson, Texas A&M University Discussants: Patrick Verwijmeren, Erasmus University Rotterdam Sturla Fjesme, University of Melbourne Institutional Investors & Governance – Woodward Conference Room C Session Chair: Zhen Shi, University of Melbourne Portfolio Manager Compensation in the U.S. Mutual Fund Industry Linlin Ma, Northeastern University Yuehua Tang, Singapore Management University Juan-Pedro Gómez, IE Business School 4 Finance Down Under 2014 Building on the Best from the Cellars of Finance Capital Gains Lock-in and Governance Choices Stephen G. Dimmock, Technological University Capital Gains Lock-in Nanyang and Governance Choices William C. Gerken, University of Technological Kentucky Stephen G. Dimmock, Nanyang University Capital Gains Lock-in and Governance Choices Zoran Ivković, Michigan State University William C. Gerken, University of Kentucky Stephen G. Dimmock, NanyangofTechnological University Scott J.Ivković, Weisbenner, University Illinois and NBER Zoran Michigan State University William C. Gerken, University of Kentucky Scott J. Weisbenner, University of Illinois and NBER Zoran Ivković, Michigan State University Discussants: ScottSotes-Paladino, J. Weisbenner, University and NBER Juan University of of Illinois Melbourne Discussants: Felix Meschke, University of Kansas Juan Sotes-Paladino, University of Melbourne Discussants: Felix Meschke, University of Kansas Juan Sotes-Paladino, University of Melbourne Felix Meschke, University of Kansas FRIDAY, March 7, 2014, 2:00 pm – 3:10 pm FRIDAY, March 7, 2014, 2:00 pm – 3:10 pm FRIDAY, March 7, 2014, 2:00 pm – 3:10 pm Firms in Asset Pricing – Woodward Conference Room A Session Zeng, –University of Conference Melbourne Room A Firms inChair: AssetQi Pricing Woodward Session Chair: Qi Zeng, University of Melbourne Room A Firms in Asset Pricing Woodward Conference Dividend Policy,–Investment, and Stock Returns SessionSeung Chair:Mo Qi Zeng, University of Melbourne Choi, International Dividend Policy, Investment, Monetary and StockFund Returns Shane A. Johnson, Texas A&MMonetary UniversityFund Seung Mo Choi, International Dividend Policy, Investment, and Stock Returns Hwagyun Kim, Texas A&M University Shane A. Johnson, Texas A&M UniversityFund Seung Mo Choi, International Monetary Changwoo Nam,Texas KoreaA&M Development Institute Hwagyun Kim, University Shane A. Johnson, Texas A&M University Changwoo Nam, Korea Development Institute Hwagyun Risks Kim, Texas A&M University Volatility and Growth Options Changwoo Nam, Korea Development Institute Hengjie University of HengjieAi, Ai, University of Minnesota Minnesota Volatility Risks and Growth Options Dana Kiku, University of Illinois at Urbana-Champaign Dana Kiku, University of of Minnesota Illinois at Urbana-Champaign Hengjie Ai,Risks University Volatility and Growth Options Dana Kiku, UniversityofofMinnesota Illinois at Urbana-Champaign Hengjie Ai, University Discussants: Dana University of of Illinois at Urbana-Champaign Bruce Kiku, Grundy, University Melbourne Discussants: Bradley Paye, University of Georgia Bruce Grundy, University of Melbourne Discussants: Bradley Paye, University Bruce Grundy, UniversityofofGeorgia Melbourne Bradley Paye, University of Georgia Coming, Going, or Staying? – Woodward Conference Room B Session Joshua Shemesh, University of MelbourneRoom B Coming,Chair: Going, or Staying? – Woodward Conference Session Chair: Joshua Shemesh, University of MelbourneRoom B Coming, Going, or Staying? Woodward Conference CEO Tournaments: A– Cross-Country Analysis of Causes, Cultural Influences, Sessionand Chair: Joshua Shemesh, University of Melbourne CEOConsequences Tournaments: A Cross-Country Analysis of Causes, Cultural Influences, Natasha Burns, University of Texas at San Antonio and CEOConsequences Tournaments: A Cross-Country Analysis of Causes, Cultural Influences, Kristina Minnick, Bentley University Natasha Burns, University of Texas at San Antonio and Consequences Laura T.Minnick, Starks, University of Texas at Austin Kristina Bentley University Natasha Burns, University of Texas at San Antonio Laura T.Minnick, Starks, University of Texas at Austin Kristina Bentley University Laura T. Starks, University of Texas at Austin Does it Pay to Stay? An Examination of Long-Term Advisor Relationships David A. Becher, Drexel University Does it Pay to Stay? An Examination of Long-Term Advisor Relationships Rachel Gordon, Drexel University David Becher, Drexel University Does itA. Pay to Stay? An Examination Jennifer L. Juergens, Drexel Universityof Long-Term Advisor Relationships Rachel Gordon, Drexel University David A. Becher, Drexel University Jennifer L. Juergens, University Rachel Gordon, DrexelDrexel University Discussants: Jennifer L. Juergens, Renée Adams, UNSW Drexel University Discussants: Chander Shekhar, University of Melbourne Renée Adams, UNSW Discussants: Chander Shekhar, University of Melbourne Renée Adams, UNSW 6 2014 Building on the Best from the Cellars of Finance 5 Finance Down Under Chander Shekhar, University of Melbourne 6 Networks or Crowds? – Woodward Conference Room C Networks or Crowds? – Woodward Conference Room C Session Chair: Vincent Grégoire, University of Melbourne Session Chair: Vincent Grégoire, University of Melbourne Networks or Crowds? – Woodward Conference Room C Hedge Fund Crowds and Mispricing SessionHedge Chair: Fund Vincent Grégoire, and Mispricing Blerina Reca, Crowds University ofUniversity Toledo of Melbourne Blerina Reca, University of Toledo Richard W. Sias, University of Arizona HedgeJ.Fund Crowds and Mispricing Richard W. Sias, University ofUniversity Arizona Harry Turtle, West Virginia BlerinaJ.Reca, of Toledo Harry Turtle,University West Virginia University Richard W. Sias, University of Arizona The Convergence and Divergence of Investors’ Opinions around Earnings News: HarryConvergence J. Turtle, Virginia University The and Divergence of Investors’ Opinions around Earnings News: Evidence from West a Social Network Evidence fromGiannini, a Social Network Robert Charles Blue Crest Capital Management The Convergence andChristian Divergence of Investors’ Opinions around Earnings News: Robert Blue Crest Capital Management Paul J.Charles Irvine, Giannini, Texas University Evidence from Texas a Social Network Paul J. Irvine, University Tao Shu, University ofChristian Georgia Robert Charles Giannini, Blue Crest Capital Management Tao Shu, University of Georgia Paul J. Irvine, Texas Christian University Discussants: Tao Shu,O.University of Georgia Discussants: George Aragon, Arizona State University GeorgeIvković, O. Aragon, Arizona State University Zoran Michigan State University Discussants: Zoran Ivković, Michigan State University George O. Aragon, Arizona State University Zoran Ivković, Michigan State University FRIDAY, March 7, 2014, 3:30 pm – 4:40 pm 3:45pm 4:55pm FRIDAY, March 7, 2014, 3:30 pm – 4:40 pm FRIDAY, March 7, –2014, 3:30 pm – 4:40 Room pm A New Assets for Pricing Woodward Conference New Assets forThijs Pricing Woodward A Session Chair: van–der Heijden, Conference University ofRoom Melbourne Session Chair: Thijs van der Heijden, University of Melbourne New Assets for Pricing – Woodward Conference Room A The Financialization of Storable Commodities SessionThe Chair: Thijs van der Heijden, University of Melbourne Financialization of Storable Commodities Steven D. Baker, University of Virginia Steven D. Baker, University of Virginia The Financialization of Storable Commodities Risk Premia in Gold Lease Rates Steven D.University Baker, University of Virginia Risk Le, Premia in Gold Anh of Lease North Rates Carolina at Chapel Hill Anh Le, University North Carolina at Chapel Hill Haoxiang Zhu, MIT of Sloan School of Management Risk Premia Gold Lease Ratesof Management Haoxiang Zhu,inMIT Sloan School Anh Le, University of North Carolina at Chapel Hill Discussants: Haoxiang Zhu, MIT Sloan School of Management Discussants: Antonio Gargano, University of Melbourne Antonio Gargano, University of Melbourne Jeff Harris, Syracuse University Discussants: Jeff Harris, Syracuse University Antonio Gargano, University of Melbourne Jeff Harris, Syracuse University Claims in Conflict – Woodward Conference Room B Claims in Conflict – Woodward Conference Room B Session Chair: Stefan Petry, University of Melbourne Session Chair: Stefan Petry, University of Melbourne ClaimsDebt in Conflict – Woodward Conference Decisions Room B Across Countries Renegotiation and Investment SessionDebt Chair: Stefan Petry, University of Melbourne Renegotiation and Investment Decisions Across Countries Giovanni Favara, Federal Reserve Board Giovanni Favara, Federal Reserve Board Erwan Morellec, Swiss Finance Institute Debt Renegotiation and Investment Decisions Across Countries Erwan Finance Institute EnriqueMorellec, Schroth, Swiss City University London Giovanni Favara, Federal Reserve Board Enrique Schroth, University London Philip Valta, HECCity Paris Erwan Morellec, Philip Valta, HECSwiss ParisFinance Institute Enrique Schroth, City University London in Mergers Dual Ownership, Returns, and Voting Philip Valta, HEC Returns, Paris Dual Ownership, and in Mergers Andriy Bodnaruk, University ofVoting Notre Dame Andriy Bodnaruk, University of Dame Notre Dame Marco Rossi, University of Notre Dual Returns, and Voting MarcoOwnership, Rossi, University of Notre Dame in Mergers Andriy Bodnaruk, University of Notre Dame 6 Finance Down UnderRossi, 2014 Building on the the 7Cellars of Finance Marco University of Best Notrefrom Dame 7 Discussants: Christine Brown, Monash University Thomas Moeller, Texas Christian University Tricks of the Trading – Woodward Conference Room C Session Chair: Carole Comerton-Forde, University of Melbourne A Simple Multimarket Measure of Information Asymmetry Travis L. Johnson, The University of Texas at Austin Eric C. So, Massachusetts Institute of Technology Trading Fast and Slow: Colocation and Market Quality Jonathan Brogaard, University of Washington Björn Hagströmer, Stockholm University Lars Nordén, Stockholm University Ryan Riordan, University of Ontario Discussants: Eric Hughson, Claremont McKenna College Ekkehart Boehmer, EDHEC SATURDAY, March 8, 2014, 10:35 am – 11:45 am Special Session – The Spot, Basement Theatre Session Chair: Neal Galpin, University of Melbourne Does Group Affiliation Facilitate Access to External Financing? Evidence from IPOs by Family Business Groups Ronald W. Masulis, University of New South Wales Peter Kien Pham, University of New South Wales Jason Zein, University of New South Wales Financial Flexibility and Corporate Cash Policy Tao Chen, The Chinese University of Hong Kong Jarrad Harford, University of Washington Chen Lin, The Chinese University of Hong Kong Discussants: Michelle Lowry, Pennsylvania State University Thomas Bates, Arizona State University Finance Down Under 2014 Building on the Best from the Cellars of Finance 7 SHORT BIOGRAPHY OF KEYNOTE SPEAKERS SHORT BIOGRAPHY OF KEYNOTE SPEAKERS Stewart C. Myers Stewart C. Myers Robert C. Merton (1970) Professor of Finance, MIT Sloan School of Robert C. Merton (1970) Professor of Finance, MIT Sloan School of Management. Management. Professor Myers’ research is primarily concerned with the valuation of real and Professor Myers’ withthe thefinancial valuation aspects of real and financial assets, research corporateis primarily financial concerned policy, and of financial assets, corporate financial policy,Myers and is thethefinancial of government regulation of business. Professor author ofaspects influential government regulation oftopics, business. Professor Myerspresent is the author of influential research papers on many including adjusted value, rate of return research papers on many topics,allocation including in adjusted present rateand of return regulation, pricing and capital insurance, realvalue, options moral pricing and capital allocation options moral hazard, and information regulation, issues in capital structure decisions. He is in theinsurance, co-author real of the classicand textbook, hazard, andofinformation issues in capital decisions. He is the co-author of the classic textbook, Principles Corporate Finance, now in structure its 11th edition. Principles of Corporate Finance, now in its 11th edition. Professor Myers is the past president of the American Finance Association and an elected Fellow of the Professor Myers is the past president ofHe thealso American Finance Association andthe an elected Fellow of the Financial Management Association. is a Research Associate of National Bureau of Financial Association. He alsoGroup, is a Inc., Research the National Bureau of Economic Management Research, a principal of the Brattle and a Associate director of of Entergy Corporation. Economic Research, a principal of the Brattle Group, Inc., and a director of Entergy Corporation. Professor Myers holds an AB from Williams College and an MBA and a PhD from Stanford Professor Myers holds an AB from Williams College and an MBA and a PhD from Stanford University. University. Professor Myers' current research focuses on three areas. (1) Theoretical models of the long-run Professor of Myers' current research focuses three areas. (1) Theoretical modelscorporations. of the long-run dynamics capital investment, payout, andon borrowing decisions by mature public The dynamics of important capital investment, payout, and borrowing decisions byasmature public corporations. models have implications for corporate governance as well corporate finance generally.The (2) models have important implications corporate governance well as finance (2) Efficient allocation of risk capital byfor banks and other financialasfirms. (3)corporate Applied work on generally. the valuation Efficient allocation risk capital by banks andthat otherstandard financialtests firms. (3) Applied worktheories on the valuation of real options. Theofvaluation results indicate of capital structure are misof real options. The valuation indicate thattests. standard tests of capital structure theories are misspecified, and Professor Myers results is designing better specified, and Professor Myers is designing better tests. https://mitsloan.mit.edu/faculty/detail.php?in_spseqno=41081 https://mitsloan.mit.edu/faculty/detail.php?in_spseqno=41081 Ron Giammarino Ron Giammarino PHN Professor in Corporate Finance, Director, Phillips, Hager & PHN CorporateResearch, Finance,Professor Director, and Phillips, Hager & NorthProfessor Centre forinFinancial Chair, Finance North Centre for Financial Research, Professor and Chair, Finance Division, University of British Columbia Division, University of British Columbia Professor Giammarino is a Professor of Finance with the Sauder School of Professor at Giammarino is a Professor Finance with the Sauder Schooland of Business the University of BritishofColumbia. He received a Ph.D. Business at Queen’s the University British HeXavier received a Ph.D. and M.A. from and a of B.A. fromColumbia. St. Francis University. He M.A. fromholds Queen’s and a B.A. Francis Xavier University. He currently the Phillips Hagerfrom and St. North Professorship in Corporate holds and the North Phillips Hager North Research Professorship Corporate Finance, is a director of thecurrently Phillips Hager Centre forand Financial and is in Chairman of Finance, is aDivision director at ofUBC. the Phillips Hager and North Centre for Financial Research and is Chairman of the Finance the Finance Division at UBC. His research interests include capital structure, bankruptcy, financial regulation, real options and risk His research interests include capital structure, financialrelated regulation, real and risk dynamics, and ambiguity in corporate finance. bankruptcy, He has published articles in options The Journal of dynamics,The andReview ambiguity in corporate finance. He has related articles inAnalysis, The Journal of Finance, of Financial Studies, The Journal of published Financial and Quantitative and The Finance, The Review Financial He Studies, The Journal of Financial andthe Quantitative Analysis, and The Canadian Journal of of Economics. has been as Associate Editor of Review of Financial Studies Canadian Journal ofJournal Economics. He has been as Associate of theasReview of Financial Studies and The Canadian of Administrative Studies and Editor has served a director of the Western and TheAssociation. Canadian Journal of Administrative Studies and has served as a director of the Western Finance Finance Association. http://finance.commerce.ubc.ca/people/giammarino/ http://finance.commerce.ubc.ca/people/giammarino/ 8 Finance Down Under 2014 Building on the Best from the Cellars of Finance 9 Paolo Fulghieri Macon G. Patton Distinguished Professor and Area Chair of Finance, Kenan-Flagler Business School, University of North Carolina Professor Fulghieri's research interests are in corporate finance, entrepreneurial finance, and financial intermediation, with a special focus on venture capital and initial public offerings. As part of his research activity, he has published extensively in leading finance journals such as the Journal of Finance, Journal of Financial Economics, and Review of Financial Studies. He also is the winner of a best paper award in the Journal of Banking and Finance. He is currently executive editor of The Review of Corporate Finance Studies, a new first-tier journal that disseminates significant new research in financial economics. He served as co-editor of The Review of Financial Studies from 2006-10. Professor Fulghieri has taught extensively in corporate finance in the MBA and Executive Education programs at Columbia University, Northwestern University, University of Chicago, and INSEAD, where he was also dean of its PhD program. He received his PhD and MA in economics from the University of Pennsylvania, and his Laurea in economics from Universita' Commerciale L. Bocconi in Milan. http://www.kenan-flagler.unc.edu/faculty/directory/finance/paolo-fulghieri Finance Down Under 2014 Building on the Best from the Cellars of Finance 9 ABSTRACTS ABSTRACTS ABSTRACTS ABSTRACTS Bondage Risk Bondage Bondage Risk Risk Bondage Bonding Risk Sovereign Risk Local Currency Local Currency Sovereign Risk Local Currency Sovereign Risk Wenxin Du and Jesse Schreger Wenxin Du Schreger Local Currency Sovereign Risk Wenxin Du and and Jesse Jesse Schreger Wenxin Du and Jesse Schreger Do governments default on debt denominated in their own currency? We introduce a new Do default on debt denominated in their currency? introduce new Do governments governments default onrisk, debtthe denominated in credit their own own currency? We introduce new measure of sovereign credit local currency spread, defined We as the spread ofaa local measure of sovereign credit local currency credit spread, defined as the spread of Do governments default onrisk, debtthe denominated in their own currency? introduce new measure of sovereign credit risk, the local currency credit spread, defined We as the spread ofa local local currency bonds over the synthetic local currency risk-free rate constructed using cross currency currency bonds synthetic local currency risk-free rate using cross measure of sovereign credit risk, the local currency credit spread, defined as theCompared spread of local currency bonds over the synthetic local currency risk-free rate constructed constructed using cross currency currency swaps. We findover thatthe local currency credit spreads are positive and sizable. with swaps. We find that local currency credit spreads are positive and sizable. Compared with currency bonds the synthetic local currency risk-free rate constructed using cross currency swaps.spreads We find that local currency credit spreads are positive andcredit sizable. Compared with credit onover foreign currency denominated debt, local currency spreads have lower credit spreads on foreign currency denominated debt, local currency credit spreads have lower swaps. We find that local currency credit spreads are positive and sizable. Compared with credit spreads on foreign currency denominated debt, local currency credit spreads have lower means, lower cross-country correlations, and are less sensitive to global risk factors. Global means, lower correlations, and less sensitive to factors. credit spreads on foreign currency denominated credit spreads haveGlobal lower means, lower cross-country cross-country correlations, and are aredebt, lesslocal sensitive to global global risk factors. Global risk aversion and liquidity factors can explain more timecurrency variation in risk these credit spread risk aversion and liquidity can time in these credit spread means, lowerthan cross-country correlations, and are more less sensitive to global risk aversion andmacroeconomic liquidity factors factors can explain explain more time variation variation in risk thesefactors. credit Global spread differentials fundamentals. differentials fundamentals. risk aversionthan andmacroeconomic liquidity factors can explain more time variation in these credit spread differentials than macroeconomic fundamentals. differentials macroeconomic fundamentals. Savers and than Spenders: Fiscal Policy as a Potential Resolution to the Treasury Bond Savers Spenders: Savers and and Spenders: Fiscal Fiscal Policy Policy as as a a Potential Potential Resolution Resolution to to the the Treasury Treasury Bond Bond Premium Puzzle Premium Puzzle Savers Spenders: Fiscal Policy as a Potential Resolution to the Treasury Bond Premium Puzzle Alex C. and Hsu Alex C. Premium Puzzle Alex C. Hsu Hsu Alex paper C. Hsuprovides an explanation for the bond premium puzzle: Treasury bond risk premia This This paper explanation the Treasury bond premia This paper provides provides anaverages explanation for the bond bond premium puzzle: Treasury bond risk risk premia that match historicalan are for obtained in apremium general puzzle: equilibrium production economy that historical obtained in aapremium general equilibrium production economy This match paperby provides anaverages explanation for the bond Treasury bond risk premia that match historical averages arewith obtained inrelative general equilibrium production economy populated savers and spendersare constant riskpuzzle: aversion around 3. With Epsteinpopulated savers spenders constant risk aversion 3. With Epsteinthat matchby historical averages obtained inrelative a general production economy populated by savers and and spenders with constant relative risk equilibrium aversion around around 3. the Withstochastic EpsteinZin-Weil recursive utilities, thearewith ability to optimize intertemporally raises Zin-Weil recursive utilities, the ability to optimize raises stochastic populated by savers spenders constant relative risk aversion With EpsteinZin-Weil factor recursive utilities, the with ability to optimize intertemporally raises3. the the stochastic discount of theand representative saver as the agent’sintertemporally future wealtharound becomes riskier due to discount factor of representative saver as the agent’s future wealth riskier due to Zin-Weil recursive ability to optimize intertemporally raises the stochastic discount factor of the theutilities, representative saver asdown the agent’s future wealth becomes becomes riskier duerate to the prospect of switching to thethe spender type the road. Government spending and tax the prospect of switching to the spender type down the road. Government spending and tax rate discount factor of the representative saver as the agent’s future wealth becomes riskier due to the prospect of switching to the spender type down the road. Government spending and tax rate shocks account for almost all of the model-implied unconditional mean risk premium on 10shocks account for the unconditional mean risk on 10the prospect ofbonds. switching theof type down the road. Government and tax shocks account for almost almosttoall all ofspender the model-implied model-implied unconditional mean spending risk premium premium on rate 10year nominal year nominal bonds. shocks account for almost all of the model-implied unconditional mean risk premium on 10year nominal bonds. year nominal bonds. Information: Control vs. Chaos? Information: Information: Control Control vs. vs. Chaos? Chaos? Information: Control Corporate News Releases vs. andChaos? Equity Vesting Corporate News and Vesting Corporate News Releases and Equity Equity Vesting Alex Edmans, LuisReleases Goncalves-Pinto, Yanbo Wang and Moqi Xu Alex Edmans, Luis Goncalves-Pinto, Yanbo Wang Corporate News and Equity Vesting Alex Edmans, LuisReleases Goncalves-Pinto, Yanbo Wang and and Moqi Moqi Xu Xu Alexshow Edmans, Luis Goncalves-Pinto, Wangofand Moqi Xu We that CEOs strategically timeYanbo the release corporate news to coincide with months in We that CEOs strategically time release of corporate to months in We show show that CEOsvests. strategically time the the releaseare of determined corporate news news to coincide coincide with months in which their equity These vesting months by equity grantswith made several which their equity vests. These months are determined by grants made several We show that CEOs strategically timedriven the release ofcurrent corporate news to coincide months in which their equity vests. Thesetovesting vesting months are determined by equity equity grantswith made several years prior and thus unlikely be by the information environment. We find years prior thus unlikely be by the environment. We find whichcompared their and equity vests. Theseto vesting months arecurrent determined by news equity grantsthe made several years prior and thus unlikely to be driven driven byrelease the current information environment. We find that, to non-vesting months, firms 12.5%information more during months in that, to non-vesting months, firms 12.5% more during months in yearscompared prior thus unlikely to be driven the information environment. We find that, compared to non-vesting months, firmsby release 12.5% more news during the months in which CEOs'and restricted pay is pre-scheduled torelease vest.current We also find anews reduction in the news releases which CEOs' restricted pay is vest. also find reduction in news releases that, compared to prior non-vesting months, release 12.5% more during months which CEOs' restricted pay is pre-scheduled pre-scheduled to vest. We We alsovesting. find aanews reduction in the news releases both one month to vesting and firms two to months after News releases lead to ina both one month prior to and two months after vesting. News releases to which CEOs' restricted pay isprices pre-scheduled vest. We also find a reduction infrom newslead releases both one month prior to vesting vesting and trading two to months after vesting. News releases lead to aa temporary run-up in stock volume, potentially resulting increased temporary run-up in stock prices and volume, potentially resulting increased both oneattention month to vesting two months after vesting. News releases temporary run-up prior in reduced stock prices and trading trading volume, potentially resulting from increased investor or information asymmetry. This allows the CEO tofrom cashlead out to at aa investor attention reduced information asymmetry. allows CEO cash out temporary run-up in stockliquid prices and trading volume,This potentially resulting investor attention or reduced information asymmetry. This allows the the CEO to tofrom cashincreased out at at aa higher price and inor a more market. higher and aa more liquid market. investor attention reduced information higher price price and in inor more liquid market. asymmetry. This allows the CEO to cash out at a higher priceInformation and in a moreatliquid market. Redacting the Initial Public Offering Redacting Information Initial Redacting Information at the Initial Public Offering Audra L. Boone, Ioannis at V.the Floros andPublic Shane Offering A. Johnson Audra L. Ioannis V. Floros and Shane A. Redacting Information Initial Audra L. Boone, Boone, Ioannis at V.the Floros andPublic Shane Offering A. Johnson Johnson Audra L. Boone, Ioannis V. Floros and Shane A. Johnson Despite the importance of information asymmetries in IPO pricing, almost 40% of IPO firms Despite the information in almost 40% of Despiteinformation the importance importance oftheir information asymmetries in IPO IPO pricing, pricing, almosthave 40%characteristics of IPO IPO firms firms redact fromof filings toasymmetries keep it confidential. These firms redact filings to keep confidential. These firms characteristics Despiteinformation thewith importance in IPO pricing, almosthave 40% of tradeoff IPO firms redact information from their filingsproprietary toasymmetries keep it it information confidential. These firms have characteristics consistent the from needoftheir toinformation protect from competitors. The is consistent with the need to protect from competitors. tradeoff is redact information filingsproprietary to increases keep it information confidential. These firms haveThe characteristics consistent withinformation the from need their tosignificantly protect proprietary information from competitors. The tradeoff is that redacting IPO underpricing. Redacting firms are more that increases IPO Redacting firms are consistent withinformation the needbytosignificantly protect capitalists, proprietary information from competitors. The is that redacting information significantly increases IPOisunderpricing. underpricing. Redacting firms are more more likelyredacting to have backing venture which consistent with the need to tradeoff implicitly likely to backing venture which consistent the to that increases IPOis Redacting firms are more likelyredacting to have have information backing by by significantly venture capitalists, capitalists, which isunderpricing. consistent with with the need need to implicitly implicitly 11 10 Finance Under 2014 Building on the capitalists, Best from the Cellarsisof consistent Finance 11 likelyDown to have backing by venture which with the need to implicitly 11 11 certify proprietary information not revealed to investors; the presence of venture capital certify information to investors; thewith presence of venturethat capital backingproprietary substantially mitigates not the revealed underpricing. Consistent the hypothesis the backing substantially mitigates the revealed underpricing. Consistent the hypothesis that the certify proprietary information not to investors; thewith presence of venture capital redacted information provides competitive advantages over rivals, we find that redacting firms certify proprietary information not revealed to investors; the presence of venture capital redacted information provides competitive advantages over rivals, we find that redacting firms backing substantially mitigates the underpricing. Consistent with the hypothesis that the are significantly more profitablenot thanrevealed their industry peers inthethe first three years. backing substantially mitigates the Consistent with the hypothesis that the certify proprietary information to investors; presence of post-IPO venture capital are significantly more profitable thanunderpricing. their industry peers in the first three post-IPO years. redacted information provides competitive advantages over rivals, we find that redacting firms Redacting firm insiders also sell smaller fractions of their shares in the first two years postredacted information provides competitive advantages over rivals, we find that redacting firms backing substantially mitigates the underpricing. Consistent with the hypothesis that the Redacting firm insiders also sell smaller fractions of their shares in the first two years postare significantly more profitableinformation than their has industry peers value in theand first three post-IPO years. IPO, suggesting that proprietary significant yet isthat undervalued in the are significantly more profitable than their industry peers in theand first three post-IPO years. redacted information provides competitive advantages over value rivals, we find redacting firms IPO, suggesting that proprietary information has significant yet is undervalued in the Redacting firm insiders also sell smaller fractions of their shares in the first two years postmarket in that period. Redacting firms earn significantly greater abnormal stock returns than Redacting firmperiod. insiders also sellinformation smaller fractions of peers theirgreater shares in the first tworeturns yearsyears. postare significantly more profitable than their industry in theand first three post-IPO market in that Redacting firms earn significantly abnormal stock than IPO, suggesting that proprietary has significant value yet is undervalued in the non-redacting firms and redacting insiders catch up to non-redacting insiders in sales of their IPO, suggesting that and proprietary has significant value yet is undervalued the Redacting firmfirms insiders also sellinformation smaller fractions sharesand in the first twosales years postnon-redacting redacting insiders catch upoftotheir non-redacting insiders in ofin their market in the that period. Redacting firms earn significantly greater abnormal stock returns than shares in third year post-IPO. The results illustrate the tradeoffs firms make in balancing market in the thatthird period. Redacting firms earncatch significantly greater abnormal stock returns than IPO, suggesting thatyear proprietary information has significant value and yet is make undervalued intheir the shares in post-IPO. The results illustrate the tradeoffs firms in balancing non-redacting firms and redacting insiders up to non-redacting insiders in sales of their need for capital, investors’ for to greater price securities, and firms’ needs to non-redacting firms and redactingneeds insiders catch up to non-redacting insiders in sales of their market in the that period. Redacting firms earninformation significantly abnormal stock returns than their need for capital, investors’ needs for information to price securities, and firms’ needs to shares in third year post-IPO. The results illustrate the tradeoffs firms make in balancing protect proprietary information from competitors. shares in the third year post-IPO. The results illustrate the tradeoffs firms make in balancing non-redacting firmsinformation and redacting insiders catch up to non-redacting insiders salesneeds of their protect proprietary from competitors. their need for capital, investors’ needs for information to price securities, and in firms’ to their forthird capital, needs for information securities, firms’ needs to sharesneed in the yearinvestors’ post-IPO. The results illustrate to theprice tradeoffs firmsand make in balancing protect proprietary information from competitors. protect proprietary information competitors. their need for capital, investors’from needs for information to price securities, and firms’ needs to protect proprietary information from competitors. Institutional Investors & Governance Institutional Investors & Governance Institutional Investors & Governance Portfolio Manager Compensation in the U.S. Mutual Fund Industry Institutional Investors & Governance Portfolio Manager Compensation in theGómez U.S. Mutual Fund Industry Linlin Ma, Yuehua Tang and Juan-Pedro Institutional Investors & Governance Linlin Ma,Manager Yuehua Tang and Juan-Pedro Portfolio Compensation in theGómez U.S. Mutual Fund Industry Portfolio Manager Compensation in theGómez U.S. Mutual Fund Industry Linlin aMa, Yuehua Tang and Juan-Pedro Using unique hand-collected dataset of Gómez over mutual we study the compensation Linlin Ma, Yuehua Tang and Juan-Pedro Portfolio Manager Compensation in the U.S.4,000 Mutual Fundfunds, Industry Using a unique hand-collected dataset of over 4,000 mutual funds, we study the compensation structures of individual portfolio managers in the U.S. mutual fund industry. About threeLinlin aMa, Yuehua Tang portfolio and Juan-Pedro structures of individual managers insample the U.S. mutual fund industry. About Using unique hand-collected dataset of Gómez over 4,000 mutual funds, we study the compensation quarters of the portfolio managers in our receive performance-linked pay threefrom Using a unique hand-collected dataset of over 4,000 mutual funds, we study the compensation quarters of the portfolio managers in our sample receive performance-linked pay threefrom structures of individual portfolio managers in the U.S. mutual fund industry. About investment advisors. Managers with performance-based compensation exhibit superior fund structures of individual portfolio managers in the U.S. mutual fund industry. About threeUsing a unique hand-collected dataset of over 4,000 mutual funds, we study the compensation investment Managers with performance-based compensation exhibit superior fund quarters of advisors. the portfolio managers inlink ourpay sample receive performance-linked pay from performance, especially when advisors to performance over longer time periods. By quarters of the portfolio managers in our sample receive performance-linked pay from structures of individual portfolio managers in the U.S. mutual fund industry. About threeperformance, especially when advisors link pay to performance over longer time periods. By investment advisors. Managers with performance-based compensation exhibit superior fund contrast, we do not find that alternative compensation arrangements such as pay linked to fund investment advisors. Managers with performance-based compensation exhibit superior fund quarters of the portfolio managers in our sample receive performance-linked pay from contrast, we do not find that alternative compensation arrangements such as pay linked to fund performance, especially when advisors link pay to performance over longer time periods. By assets or advisor profits are associated with better performance. Performance-linked pay performance, when advisors link pay to fund performance over longer time periods. By investment advisors. Managers with performance-based compensation exhibit superior assets or we advisor profits arelarger associated with better fund performance. Performance-linked pay contrast, doespecially not find that alternative compensation arrangements such asportfolio pay linked to fund fund is more prevalent among investment advisors, non-stakeholder managers, contrast, we doespecially not find that alternative compensation arrangements such asportfolio pay linked to fund performance, when advisors link pay to fund performance over longer time periods. By is more prevalent among larger investment advisors, non-stakeholder managers, assets or advisor profits are associated with better performance. Performance-linked pay portfolio management teams, and in-house managed funds. Overall,such our study assets or we advisor profits arelarger associated with better fund performance. Performance-linked pay contrast, do not find that alternative compensation arrangements asportfolio payprovides linked tonovel fund portfolio management teams, and in-house managed funds. Overall, our study provides novel is more prevalent among investment advisors, non-stakeholder managers, empirical evidenceprofits on portfolio manager compensation inperformance. the mutual fund industry. is more among investment advisors, portfolio managers, assets or prevalent advisor arelarger associated with better fund Performance-linked pay empirical evidence on portfolio manager compensation in non-stakeholder theOverall, mutual fund industry. portfolio management teams, and in-house managed funds. our study provides novel portfolio management teams, and in-house managed funds. Overall, our study provides novel is more prevalent among larger investment advisors,in non-stakeholder portfolio managers, empirical evidence on portfolio manager compensation the mutual fund industry. Capital Lock-in and Governance Choices empirical evidence on portfolio manager compensation in theOverall, mutual fund industry. portfolioGains management teams, and in-house managed funds. our study provides novel Capital Gains Lock-in and Governance Choices Stephen G.evidence Dimmock, William C. Gerken, Zoran Ivković Scott J.fund Weisbenner empirical on portfolio manager compensation in and the mutual industry. Stephen G. Dimmock, C. Gerken,Choices Zoran Ivković and Scott J. Weisbenner Capital Gains Lock-inWilliam and Governance Capital Gains Lock-inWilliam and Governance Choices Stephen G. Dimmock, C. Gerken, Zoran Ivković andsell Scott J. Weisbenner Capital gains taxes create a disincentive forChoices mutual funds to stocks that have accrued gains. Stephen G. Dimmock, William C. Gerken, Zoran Ivković andsell Scott J. Weisbenner Capital Gains Lock-in and Governance Capital gains taxes create a disincentive for mutual funds to stocks thatinhave accrued gains. Because of differences in the tax status of funds’ investors and differences accrued gains in a Stephen G. Dimmock, William C.status Gerken, Zoran Ivković and Scott J. Weisbenner Because of differences in the tax offor funds’ investors and differences accrued gains in a Capital gains taxes create a disincentive mutual funds to sell stocks thatin have accrued gains. stock, capital gains “lock-in” will vary across funds even for the same stock. We find that Capital gains taxes create a disincentive for mutual funds to sell stocks that have accrued gains. stock, capital gains “lock-in” will vary across funds even for the same stock. We find that Because of differences in the tax status of funds’ investors and differences in accrued gains inina funds are likely toinoppose management when they are locked-in tothat a position: forgains votes Because ofmore differences the tax status funds’ investors differences in accrued inina Capital gains taxes create a disincentive for mutual funds toand sell stocks have accrued gains. funds are more likely to oppose management when they are locked-in to a position: forfind votes stock, capital gains “lock-in” will varyof across funds even for the same stock. We that which opposing management is value increasing, a fund’s capital gains lock-in reduces thea stock, capital gains “lock-in” will vary across funds even for the same stock. We find that Because of differences in the tax status of funds’ investors and differences in accrued gains in which opposing management is value increasing, a fund’s capital gains lock-in reduces the funds are more likelythe to oppose management when are locked-in to a position: for votes in likelihood of selling stock will prior to the vote, butthey increases the likelihood of voting against funds are more likely to oppose management when they are locked-in to a position: for votes in stock, capital gains “lock-in” vary across funds even for the same stock. We find that likelihood of selling the stock prior to the vote, but increases the likelihood of voting against which opposing management is value increasing, a fund’s capital gains lock-in reduces the management. Consistent with this tax lock-in motivation, these findings are concentrated which opposing management is value increasing, a fund’s capital gains lock-in reduces the funds are more likely to oppose management when they are locked-in to a position: for votes in management. Consistent with this tax lock-in motivation, these findings are concentrated likelihood of selling the stock prior to investors. the vote, but increases the likelihood ofdeterminant voting against among funds with few tax-deferred Our resultscapital thus show of likelihood of selling the stock prior to the vote, but the likelihood of voting against which opposing management is value increasing, a increases fund’s gains one lock-in reduces the among funds with few tax-deferred investors. Our results thus show one determinant of management. Consistent with this tax lock-in motivation, these findings are concentrated corporate governance by stock mutual funds. management. Consistent with prior this taxinvestors. lock-in motivation, findings are concentrated likelihood of selling the to the vote, but the likelihood voting against corporate governance by mutual funds. among funds with few tax-deferred Ourincreases results these thus show oneof determinant of among funds with few tax-deferred Our results these thus show oneare determinant of management. Consistent with this taxinvestors. lock-in motivation, findings concentrated corporate governance by mutual funds. corporate governance by mutual funds. investors. Our results thus show one determinant of among funds with few tax-deferred corporate by mutual funds. Firms ingovernance Asset Pricing Firms in Asset Pricing Firms inPolicy, Asset Investment, Pricing and Stock Returns Dividend Firms inPolicy, Asset Investment, Pricing and Stock Returns Dividend Seung Mo Choi, A. Johnson, Hwagyun Kim and Changwoo Nam Firms inPolicy, AssetShane Pricing Seung Mo Choi, Shane A. Johnson, Hwagyun Kim and Changwoo Nam Dividend Investment, and Stock Returns Dividend Investment, and Stock Returns Seung MoPolicy, Choi, Shane A. Johnson, Hwagyun Kim and Changwoo We propose an asset pricing model in a production economy whereNam cash flows are determined Seung MoPolicy, Choi, Shane A. Johnson, Hwagyun Kim and Changwoo Nam Dividend Investment, and Stock Returns We propose an asset pricing model in a production economy where cashand flows are determined by .rms. dividend and investment decisions. Managers choose extensive intensive margins Seung Mo Choi, Shane A. Johnson, Hwagyun Kim and Changwoo Nam by .rms. dividend andpricing investment decisions. Managers choose extensive and intensive margins We propose an asset model in a production economy where cash flows are determined in payout policy while facing non-convex costs as firm cash holdings grow. Differences in the We propose an asset pricing model in a production economy where cash flows are determined in payout policy while facing non-convex costs as firmchoose cash holdings grow. in the by .rms. dividend and investment decisions. Managers extensive and Differences intensive margins by .rms. dividend andpricing investment decisions. Managers choose extensive and intensive margins We propose an asset in a production economy where cash flows are determined in payout policy while facingmodel non-convex costs cash holdings grow. Differences in the 12as firm in payout policy while facing non-convex costs cash holdings grow. in the 12as firmchoose by .rms. dividend and investment decisions. Managers extensive and Differences intensive margins Finance Down Under 2014 Building on the Best from the Cellars of Finance 11 in payout policy while facing non-convex costs 12as firm cash holdings grow. Differences in the 12 timing of dividend payments by younger growing firms and older mature firms help explain timing of and dividend payments Quantitative by younger analysis growing shows firms and mature firms help policies explain the value size premiums. that older model-implied dividend the value and sizeare premiums. Quantitative analysis shows that model-implied dividend policies and investments consistent with the data, and interactions among productivity shocks, timing of dividend payments by younger growing firms and older mature firms help explain and investments are consistent with data, cross-sectional and interactions among productivity shocks, investment, policies helpthe explain stock returns. We also policies provide the value andand sizedividend premiums. Quantitative analysis shows that model-implied dividend investment, and dividend policiestestable help explain cross-sectional stock returns. We also provide empirical support for the model’s and investments are consistent with the implications. data, and interactions among productivity shocks, empirical support for the model’s testable implications. investment, and dividend policies help explain cross-sectional stock returns. We also provide Volatility Risks and Growth Options empirical support for the model’s testable implications. Volatility and Growth Options Hengjie AiRisks and Dana Kiku Hengjie Ai and Dana Kiku Volatility Risks and Growth Options We propose to Dana measure Hengjie Ai and Kikugrowth opportunities by firms’ exposure to idiosyncratic volatility We propose to measure growththat opportunities by afirms’ exposure to idiosyncratic volatility news. Theoretically, we show the value of growth option increases in idiosyncratic news. Theoretically, we show that theofvalue of a shocks growth can option increases in idiosyncratic volatility but to its measure response to volatility aggregate be either positive or volatility negative We propose growth opportunities by firms’ exposure to idiosyncratic volatility but response to volatility of aggregate shocks canprice be either positive or negative depending on its option moneyness. weashow that sensitivity variation in news. Theoretically, we show thatEmpirically, the value of growth option increases intoidiosyncratic depending on volatility option moneyness. Empirically, we show about that price sensitivity to variationand in idiosyncratic carries significant information future investment volatility but its response to volatility of aggregate shocks can firms’ be either positive or negative idiosyncratic volatility carries for significant information about firms’options futuresuch investment and growth even after controlling conventional proxies of growth as book-todepending on option moneyness. Empirically, we show that price sensitivity to variation in growth evenother afterrelevant controlling conventionalConsistent proxies ofwith growth options such as book-tomarket and firm for characteristics. our theoretical arguments, we idiosyncratic volatility carries significant information about firms’ future investment and market and other relevant firm characteristics. Consistent with ourdoes theoretical arguments, we also find that firm’ exposure to aggregate volatility, while priced, not help predict their growth even after controlling for conventional proxies of growth options such as book-toalso find that firm’ exposure to aggregate volatility, using while our priced, does not help predict their future growth. Option-intensive firms identified idiosyncratic volatility-based market and other relevant firm characteristics. Consistent with our theoretical arguments, we future growth. Option-intensive firms identified our idiosyncratic volatility-based measure lower premiumtothan do firms that relyusing more heavily assets place. also findearn that afirm’ exposure aggregate volatility, while priced, on does not in help predict their measure earn a lower premium than do firms that rely more heavily on assets in place. future growth. Option-intensive firms identified using our idiosyncratic volatility-based measure earn a lower premium than do firms that rely more heavily on assets in place. Coming, Going, or Staying? Coming, Going, or Staying? CEO Tournaments: Cross-Country Analysis of Causes, Cultural Influences and Coming, Going, or A Staying? CEO Tournaments: A Cross-Country Analysis of Causes, Cultural Influences and Consequences Consequences Natasha Burns, KristinaAMinnick and Laura T. Starks of Causes, Cultural Influences and CEO Tournaments: Cross-Country Analysis Natasha Burns, Kristina Minnick and Laura T. Starks Consequences Using a cross-country sample, weand examine tournament structure (measured as the ratio of Natasha Burns, Kristina Minnick LauraCEO T. Starks Using a cross-country we top examine CEO tournament (measured the ratio pay between the CEOsample, and other executives) and find itstructure to be steeper in theasU.S. than of in pay between the We CEOfind andthat other top executives)structure and findvaries it to be steeper in thewith U.S.firm than in other countries. the tournament systematically Using a cross-country sample, we examine CEO tournament structure (measured as the ratioand of other countries. We findWe thatexpect the tournament structure varies systematically its witheffects firm and country characteristics. that attributes tournament pay between the CEO and other top executives) and of findtheit to be steeperand in the U.S. thanare in country characteristics. We expect and that legal attributes of the intournament and The its effects are influenced by the cultural, economic environment which it arises. hypothesis other countries. We find that the tournament structure varies systematically with firm and influenced by values the cultural, economic andtournament legal environment in which it arises.with The the hypothesis that cultural helpWe drive firms’ is consistent Guiso, country characteristics. expect that attributes structures of the tournament and its effects are that cultural values help drive firms’ tournament structures is has consistent with the Guiso, Sapienza and Zingales (2009) argument and evidence that culture an effect on preferences influenced by the cultural, economic and legal environment in which it arises. The hypothesis Sapienza and Zingales (2009) argument and evidence that culture has Our an effect on preferences and thesehelp preferences in turntournament affect economic outcomes. research shows that that beliefs, culturaland values drive firms’ structures is consistent with the Guiso, and beliefs, values and these preferences in turn affect economic outcomes. Our research shows that the cultural of Power distance, as well as positive perceptions of the effects of income Sapienza and Zingales (2009) argument and evidence that culture has an effect on preferences the cultural values of Power distance, as well as positive perceptions of the effects of income differences and competition are significantly associated with variations in tournament and beliefs, and these preferences in turn affect economic outcomes. Our research shows that differences and competition arethesignificantly associated with variations in the tournament structures. addition, we test key implication of perceptions tournament theory that current the cultural In values of Power distance, as well as positive of the effects of income structures. In addition, we be testrelated the key implication of tournament theory that the current tournament structure should to future firm performance across the 52 countries. We differences and competition are significantly associated with variations in tournament tournament structure should be related to future firm performance the 52 countries. We establish for the primary of tournament theory across in that tournament structures.support In addition, we test implication the key implication of tournament theory that thestructure current establish support for the primary implication of tournament theory in is that tournament structure tends to be positively related to firm value. Moreover, if competition viewed more favorably tournament structure should be related to future firm performance across the 52 countries. We tends to be positively related to firmtournament, value. Moreover, if competition is viewed more favorably in a country coupled with a steeper firm value istheory further We also find a establish support for the primary implication of tournament in enhanced. that tournament structure in a country coupled with aincrease steeper under tournament, firm value is furtherwhen enhanced. We also find a tendency for firm value to steeper CEO tournaments a country’s residents tends to be positively related to firm value. Moreover, if competition is viewed more favorably tendencyincome for firm value to increase under steeper CEO tournaments a country’s residents believe differentials based on effort are fair Our when research contributes to thea in a country coupled with a steeper tournament, firmoutcomes. value is further enhanced. We also find believe income differentials based effort are outcomes. Our research contributes to the recent and growing literature on theon influence of fair culture on economic outcomes. tendency for firm value to increase under steeper CEO tournaments when a country’s residents recent and growing literature on the influence of culture on economic outcomes. believe income differentials based on effort are fair outcomes. Our research contributes to the Does Paygrowing to Stay? An Examination of Long-Term Relationships recentitand literature on the influence of cultureAdvisor on economic outcomes. Does itA. Pay to Stay? An Examination of Long-Term Advisor Relationships David Becher, Rachel Gordon and Jennifer L. Juergens David A. Becher, Rachel Gordon and Jennifer L. Juergens Does it Pay to Stay? An Examination of Long-Term Advisor Relationships Using an Becher, extended history of debt, merger transactions, we examine the firmDavid A. Rachel Gordon and equity, Jenniferand L. Juergens Using anrelationship extended history of debt,find equity, we examine the firmadvisor and generally that itand is merger costly totransactions, maintain long-term relations with advisor relationship and generally find thatadvisors). it is costly to maintain long-term relations with financial advisors (underwriters or merger Firms that retain one advisor over their Using an extended history of debt, equity, and merger transactions, we examine the firmfinancial advisors (underwriters or merger advisors). Firms that retain one advisor over their advisor relationship generally find from that the it13is costly to maintain long-term relations with 12 Finance Down Under 2014and Building on the Best Cellars of Finance financial advisors (underwriters or merger advisors). Firms that retain one advisor over their 13 tendency for firm value to increase under steeper CEO tournaments when a country’s residents believe income differentials based on effort are fair outcomes. Our research contributes to the recent and growing literature on the influence of culture on economic outcomes. Does it Pay to Stay? An Examination of Long-Term Advisor Relationships David A. Becher, Rachel Gordon and Jennifer L. Juergens Using an extended history of debt, equity, and merger transactions, we examine the firmadvisor relationship and generally find that it is costly to maintain long-term relations with financial advisors (underwriters or merger advisors). Firms that retain one advisor over their entire transaction history pay higher underwriting/advisory fees, have inferior deal terms, and 13 lower analyst coverage relative to those that employ many advisors. Using financial deterioration and the firm’s information environment as catalysts for why firms may select a single advisor, we observe that even poorly performing firms obtain better terms when they utilize a variety of advisors, but informationally-sensitive firms do not. Our results suggest that only some firms benefit from advisor retention, but for most it does not pay to stay. Networks or Crowds? Hedge Fund Crowds and Mispricing Blerina Reca, Richard W. Sias and Harry J. Turtle Recent models and the popular press suggest that hedge funds follow similar strategies resulting in crowded equity trades that destabilize prices. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge funds do buy and sell the same stocks, their demand shocks drive prices toward, rather than away from, fundamental values. Even in periods of extreme market stress, we find little evidence that hedge funds exert negative externalities on each other or security prices due to crowded trades. The Convergence and Divergence of Investors’ Opinions around Earnings News: Evidence from a Social Network Robert Charles Giannini, Paul J. Irvine and Tao Shu We collect a unique dataset of Twitter posts to examine the change in investor disagreement around earnings announcements. We find that investors’ opinions can either converge (reduced disagreement) or diverge (increased disagreement) around earnings announcements. While the convergence of opinion is associated with lower earnings announcement returns, the divergence of opinion is associated with higher earnings announcement returns. Consistent with recent theory, both the convergence of opinion and the divergence of opinion are associated with greater volume reaction to earnings news. New Assets for Pricing The Financialization of Storable Commodities Steven D. Baker I construct a dynamic equilibrium model of storable commodities populated by producers, dealers, and households. When financial innovation allows households to trade in futures markets, they choose a long position that leads to lower equilibrium excess returns on futures, a more frequently upward-sloping futures curve, and higher volatility in futures and spot markets. The effect on spot price levels is modest, and extremely high spot prices only occur in conjunction with low inventories and poor productivity. Therefore such “financialization” of commodities may explain several recently observed changes in spot and futures market dynamics, but it cannot directly account for a large increase in spot prices. Finance Down Under 2014 Building on the Best from the Cellars of Finance 13 Risk Premia in Gold Lease Rates RiskLe Premia in Gold Lease Anh and Haoxiang Zhu Rates Risk Premia in Gold Lease Rates Anh Le and Haoxiang Zhu Rates RiskLe Premia in Gold Lease Anh and Haoxiang Zhu Gold is and an Haoxiang important Zhu global reserve asset, widely held by the official sector and private Anh Le Gold is anIn important reserve asset, ofwidely held by the official sectorgold, andthe private investors. this paper,global we study a measure the opportunity costs of holding gold Gold is an important global reserve asset, widely held by the official sector and private investors. paper,paid we study a measure ofwidely the opportunity costs ofrates holding gold lease - this interests in reserve gold forasset, borrowing gold. lease are gold, economically Gold rates is anIn held Gold by the official sector andthe private investors. In important this paper,global we study a measure of the opportunity costs of holding gold, the gold lease ratesInin - this interests paid indisplay gold for borrowing gold. Gold lease are economically significant magnitude andstudy substantial variations overcosts time.ofrates Using a term structure investors. paper, we a measure of the opportunity holding gold, the gold lease rates - interests paid in gold for borrowing gold. Gold lease rates are economically significant magnitude and substantial variations overin time. term structure model within risk display factors, weborrowing find that risk goldUsing lease arates are highly lease rates -“unspanned” interests paid gold for gold.premia Gold economically significant in magnitude andindisplay substantial variations over lease time. rates Usingare a term structure model within“unspanned” risk factors, substantial find that riskslope premia intime. gold lease rates highly time-varying and stronglyand increasing inwethe level and of gold lease rates, as are well as in significant magnitude variations over term structure model with “unspanned” risk display factors, we find that risk premia in goldUsing lease arates are highly time-varying and strongly increasing in the level and slope of gold lease rates, as well asthat in gold volatility. Expected excess returns of “gold bonds” are mostly positive, suggesting model with “unspanned” factors, inwethe find thatand riskslope premia in gold lease rates time-varying and stronglyrisk increasing level of gold lease rates, as are wellhighly as in gold volatility. Expected returns of “gold bonds” areofmostly positive, suggesting that they are perceived as riskyexcess investments. time-varying and strongly increasing in the level and slope gold lease rates, as well as in gold volatility. Expected excess returns of “gold bonds” are mostly positive, suggesting that they perceived as riskyexcess investments. gold are volatility. Expected returns of “gold bonds” are mostly positive, suggesting that they are perceived as risky investments. they are perceived as risky investments. Claims in Conflict Claims in Conflict Claims in Conflict Debt Renegotiation Claims in Conflictand Investment Decisions Across Countries Debt Renegotiation andMorellec, Investment Decisions Across Countries Giovanni Favara, Erwan Enrique Schroth and Philip Valta Debt Renegotiation and Investment Decisions Across Countries Giovanni Favara, Erwan Morellec, Enrique Schroth and Philip Valta Debt Renegotiation and Investment Decisions Across Countries Giovanni Favara, Erwan Morellec, Enrique Schroth and Philip Valta We develop a model investment and Schroth default decisions Giovanni Favara, ErwanofMorellec, Enrique and Philip that Valtaendogenizes levered firms' We develop a modelto of investmentasset andsales, default thatWeendogenizes leveredfriendly firms' choices with respect investment, anddecisions risk-taking. show that debtor We develop a model of investment and default decisions that endogenizes levered firms' choices withlaws respect to of investment, asset sales, andsales risk-taking. show that debtor friendly bankruptcy reduce debt overhang, limit asset and capital reallocation, and decrease We develop a model investment and default thatWe levered firms' choices with respect to investment, asset sales, anddecisions risk-taking. Weendogenizes show that debtor friendly bankruptcy laws reduce debt overhang, asset sales and andofdecrease incentives for risk-taking. These predictions are supported bycapital evidence from a panel 19,466 choices with respect to investment, assetlimit sales, and risk-taking. We reallocation, show that debtor friendly bankruptcy laws reduce debt overhang, limit asset sales and capital reallocation, and decrease incentives for These predictions are supported by from a panel 19,466 firms across 41risk-taking. countries with different bankruptcy codes. Theevidence estimated effects are large and bankruptcy laws reduce debt overhang, limit asset sales and reallocation, andof incentives for risk-taking. These predictions are supported bycapital evidence from a panel ofdecrease 19,466 firms across 41 countries with different bankruptcy The estimated effects are of large and economically significant. Our analysis suggests thatcodes. debtorby friendly bankruptcy laws mitigate incentives for risk-taking. These predictions are supported evidence from a panel 19,466 firms across 41 countries with different bankruptcy codes. The estimated effects are large and economically significant. Ourdecisions analysis suggests thatcodes. debtor friendly bankruptcy laws mitigate the distortions in corporate due to conflicts of interests between shareholders and firms across 41 countries with different bankruptcy The estimated effects are large and economically significant. Our analysis suggests that debtor friendly bankruptcy laws mitigate the distortions to conflicts of interests shareholders and debt holders. in corporate economically Ourdecisions analysis due suggests that debtor friendlybetween bankruptcy laws mitigate the distortionssignificant. in corporate decisions due to conflicts of interests between shareholders and debt holders. in corporate decisions due to conflicts of interests between shareholders and the distortions debt holders. Dual Ownership, Returns, and Voting in Mergers debt holders. Dual Ownership, Returns, Voting in Mergers Andriy Bodnaruk and Marcoand Rossi Dual Ownership, Returns, and Voting in Mergers Andriy Bodnaruk and Marco Rossi Dual Ownership, Returns, Voting in Mergers Andriy Bodnaruk and Marcoand Rossi We document thatand in Marco M&As Rossi a significant proportion of targets’ equity is owned by financial Andriy Bodnaruk We document in M&As a own significant of targets’ equity is owned by financial institutions thatthat simultaneously targets’proportion bonds (“dual holders”). Targets with larger equity We document that in M&As a significant proportion of targets’ equity is owned by financial institutions thatdual simultaneously targets’ holders”). Targets with bond larger equity ownership by holders have lower M&Abonds equity(“dual premia and larger abnormal returns, We document in M&As a own significant of targets’ equity is owned by financial institutions thatthat simultaneously own targets’proportion bonds (“dual holders”). Targets with larger equity ownership by dual holders haveown lower equity premia and larger abnormal bond particularly when dual holders stand toM&A benefit more from appreciation of their bond returns, stakes, institutions that simultaneously targets’ bonds (“dual holders”). Targets with larger equity ownership by dual holders have lower M&A equity premia and larger abnormal bond returns, particularly when dual holders toM&A benefit more from of theirrating bond returns, e.g., when by their ownership in the target is large andappreciation thelarger targetabnormal credit isstakes, nonownership dualbond holders havestand lower equity particularly when dual holders stand to benefit morepremia from and appreciation of their bond bond stakes, e.g., when grade. their bond the target is the oftarget credit rating isstakes, noninvestment Dualownership holders stand areinmore likely more to large vote inand favor the merger proposal. Our particularly when dual holders to benefit from appreciation of their bond e.g., when their bond ownership in the target is large and the target credit rating is noninvestment grade. Dual holdersofarein more likely is to in favor oftarget thedual merger proposal. Our results suggest presence coordination of vote decisions within holding financial e.g., when their the bond the target the credit rating is noninvestment grade. Dualownership holders are more likely to large vote inand favor of the merger proposal. Our results suggest presence ofarecoordination of vote decisions within dual holding financial conglomerates inthe M&A targets. investment grade. Dual holders more likely to in favor of the merger proposal. Our results suggest the presence of coordination of decisions within dual holding financial conglomerates M&A targets. of coordination of decisions within dual holding financial results suggestin presence conglomerates inthe M&A targets. conglomerates in M&A targets. Tricks of the Trading Tricks of the Trading Tricks of the Trading A SimpleofMultimarket Measure of Information Asymmetry Tricks the Trading A Simple Multimarket Measure Travis L. Johnson and Eric C. So of Information Asymmetry A Simple Multimarket Measure of Information Asymmetry Travis L. Johnson and Eric C. So A Simple Multimarket Measure Travis L. Johnson and Eric C. So of Information Asymmetry We develop and and implement a new measure of information asymmetry among traders. Travis L. Johnson Eric C. So We develop we andsolve implement a new measure information asymmetry among Specifically, for the fraction of tradersofwith an information advantage in atraders. model We develop and implement a new measure of information asymmetry among traders. Specifically, we solve for the fraction of traders with an information advantage in a model where agents have access to both equity and option markets. We compute the resulting We develop we andsolve implement a new measure information asymmetry among Specifically, for the fraction of tradersofwith an information advantage in atraders. model where agentsinformation have access to fraction both measure, equity and option markets. We compute resulting multimarket asymmetry MIA, for an individual firm-days as athe function of Specifically, we solve for the of traders with information advantage in a model where agents have access to both equity and option markets. We compute the resulting multimarket information asymmetry measure, MIA, for individual firm-days asMIA athe function of unsigned volume totals and without estimating a structural model. Empirically, has many where agents have access to both equity and option markets. We compute resulting multimarket information asymmetry measure, MIA, for individual firm-days as a function of unsigned volume totals and without estimating awith structural model. has many desirable properties: it is positively correlated spreads, priceEmpirically, impact, andasMIA absolute order multimarket information asymmetry measure, MIA, for individual firm-days a function of unsigned volume totals and without estimating a structural model. Empirically, MIA has many desirable properties: it is correlated awith spreads, priceEmpirically, impact, and absolute order unsigned totals andpositively without estimating structural model. has many desirable volume properties: it is positively correlated with spreads, price impact, and MIA absolute order 14 Finance Downproperties: Under 2014itBuilding on the Best from the Cellars of Finance 15with desirable is positively correlated spreads, price impact, and absolute order 15 15 imbalances; predicts future volatility; is an effective conditioning variable for trading strategies imbalances; predicts volatility; is an exogenous effective conditioning variable forasymmetry. trading strategies stemming from price future pressure; and detects shocks to information stemming from price pressure; and detects exogenous shocks to information asymmetry. Trading Fast and Slow: Colocation and Market Quality Trading Fast and Slow: Jonathan Brogaard, Björn Colocation Hagströmer,and LarsMarket NordénQuality and Ryan Riordan Jonathan Brogaard, Björn Hagströmer, Lars Nordén and Ryan Riordan Using user-level data from NASDAQ OMX Stockholm, we investigate how different network Using user-level datainfluence from NASDAQ Stockholm, we investigate how collocated different network connectivity speeds market OMX participant dynamics. We find that traders connectivity speeds influence market participant dynamics.participants. We find that traders have an informational advantage relative to non-colocated Wecollocated use an exchange have an upgrade informational advantage relativetraders to non-colocated useconnection an exchange system that allows colocated to upgrade participants. to an even We faster to system upgrade colocated Participants traders to upgrade to an eventheir faster connection to identify a shock tothat the allows speed hierarchy. that upgrade reduce adverse selection identify a shock to the speed hierarchy. Participants that upgrade reduce their adverse selection costs and improve their inventory management ability, allowing them to increase their market costs and improveprovision. their inventory management ability, them to increasecosts theirafter market share in liquidity Non-colocated traders incur allowing higher adverse selection the share inOverall, liquidityhowever, provision.the Non-colocated incurdifferentiation higher adverse improves selection costs the event. introductiontraders of speed both after bid-ask event. Overall, however, the results introduction speed differentiation improves spreads and market depth. Our suggestofthat the liquidity improvements are both relatedbid-ask to the spreadstraders’ and market depth.market Our results the liquidity improvements areabilities. related to the fastest increased share suggest and theirthat enhanced inventory management fastest traders’ increased market share and their enhanced inventory management abilities. Special Session Special Session Does Group Affiliation Facilitate Access to External Financing? Evidence from IPOs by Does Group Affiliation Family Business GroupsFacilitate Access to External Financing? Evidence from IPOs by Family Business Groups Ronald W. Masulis, Peter Kien Pham and Jason Zein Ronald W. Masulis, Peter Kien Pham and Jason Zein Although the literature has identified important benefits associated with group affiliation, the Although the literature hasbusiness identifiedgroups important benefits associated with group affiliation, the channels through which provide support to members remain relatively channels through business groups provide support to members relatively unexplored. Using awhich new dataset of ownership structures of 12,602 IPOs fromremain 44 countries, we unexplored. Usingfamily a new dataset ownership structures of 12,602 from 44 countries, investigate how groups of create financing advantages for IPOs young member firms we by investigate their how entry family create financing forsuggests young that member firms by facilitating intogroups the equity capital market.advantages Our evidence internal capital facilitating into market. Our can evidence that internal accumulatedtheir by aentry group in the the equity form ofcapital retained earnings enablesuggests new members to go capital public accumulated by a groupfunding in the form retained earnings canexternal enable new members to go public by bridging significant gapsof associated with costly financing. Consistent with by bridging significant funding gaps associated with costly external financing. Consistent this channel of group support, we also find that group-affiliated IPOs tend to possess with firm this channel ofgenerally group support, we with also serious find that group-affiliated IPOs tend and to possess characteristics associated external financing constraints that theyfirm are characteristics with serious external financing that they are better able to generally go public associated under weak IPO market conditions and constraints incur lowerand flotation costs better abletotoindependent go public under market incur lower flotation costs compared firms. weak After IPO listing, groupconditions affiliationand continues to benefit IPO firms compared independent firms. After external listing, group continues to benefit IPO firms by enablingtothem to overcome adverse capitalaffiliation market conditions. by enabling them to overcome adverse external capital market conditions. Financial Flexibility and Corporate Cash Policy Financial and and Corporate Cash Policy Tao Chen, Flexibility Jarrad Harford Chen Lin Tao Chen, Jarrad Harford and Chen Lin Using variations in local real estate prices as exogenous shocks to corporate financing capacity, Using variationstheincausal local real estate as exogenous shocks corporate financing we investigate effects of prices financial flexibility on cashtopolicies of US firms. capacity, Building we this investigate causal effects of financial flexibility cash policies US firms. on natural the experiment, we find strong evidence thatonincreases in realofestate valuesBuilding lead to on this natural experiment, we find strong in evidence that increases real estate values to smaller corporate cash reserves, declines the marginal value ofincash holdings, andlead lower smaller corporate cashofreserves, declines in the marginal cash less holdings, cash flow sensitivities cash. The representative US firm value holds of $0.037 of cashand forlower each cash sensitivities of cash. representative US firm to holds $0.037value. less of cash for each $1 offlow collateral, quantifying the The sensitivity of cash holdings collateral We further find $1 collateral, quantifying the sensitivity of cash holdings to value. We further find thatofthe decrease in cash holdings is more pronounced in collateral firms with greater investment that the decrease in cash holdings is more pronounced in firms with greater investment opportunities, financial constraints, better corporate governance, and lower local real estate opportunities, price volatility.financial constraints, better corporate governance, and lower local real estate price volatility. Finance Down Under 2014 Building on the Best from the Cellars of Finance 15 16 MAP & TRANSPORTATION MAP & TRANSPORTATION Melbourne Transportation: Melbourne Transportation: From the Melbourne airport to the hotels in the city, it takes 20-30 minutes, which might vary depending on the traffic. You can take aintaxi SkyBusminutes, (fare: $18 for one way/$30 From the Melbourne airport to either the hotels the(fare: city,$50-60) it takesor 20-30 which might vary for return).on Onthearrival Southern Cross Station the city, SkyBus provides a complimentary hotel depending traffic.atYou can either take a taxiin(fare: $50-60) or SkyBus (fare: $18 for one way/$30 transfer service, subjectattoSouthern availability (please visit www.skybus.com.au for details and online ticket for return). On arrival Cross Station in the city, SkyBus provides a complimentary hotel purchase). transfer service, subject to availability (please visit www.skybus.com.au for details and online ticket purchase). For your transportation needs within the city area, we highly recommend the public transit system in Melbourne. The "Myki"needs pass allows onarea, trams, trains. The effective For your transportation within travel the city webusses, highlyand recommend thePublic publictransit transitissystem in and as safe as can"Myki" be reasonably expected. Melbourne. The pass allows travel on trams, busses, and trains. The Public transit is effective and as safe as can be reasonably expected. Langham Hotel Langham Hotel 1 Southgate Ave, Southbank 1 Southgate Ave, Southbank Quay West Suites Quay West Suites 26 Southgate Ave, Southbank 26 Southgate Ave, Southbank (1) Thursday Welcome Reception (1) Thursday Welcome Reception Gate 6A, Melbourne Cricket Ground, Brunton Ave, Jack Ryder Room Gate 6A, Melbourne Cricket Ground, Brunton Ave, Jack Ryder Room Suggested Transportation: 22 minute walk - From the Langham or Quay West, walk north along the Southbank Footbridge Suggested Transportation: (notminute St. Kilda and the river. Turn rightwalk ontonorth Flinders and walkFootbridge along the 22 walkRd.), - From thecross Langham or Quay West, alongWalk the Southbank riverside. Continue Princes and across William Bridge to the Enter the via (not St. Kilda Rd.),onand cross Walk the river. Turn right ontoBarak Flinders Walk and MCG. walk along Gate 6A (between towers 3Walk & 4).and Useacross lifts 14 & 15. Barak Bridge to the MCG. Enter via riverside. Continuelight on Princes William Gate 6A (between light towers 3 & 4). Use lifts 14 & 15. Tram – From the Langham or Quay West, walk north along the Southbank Footbridge (not St. Kilda the river. Once across thenorth river,along turn the right, and enter the underground Tram –Rd.), Fromand thecross Langham or Quay West, walk Southbank Footbridge (not St. walkway about meters of Once the bridge. the walkway under the Kilda Rd.), and20 cross the east river. acrossContinue the river,onturn right, anduntil enteryou thepass underground train station and20arrive at east the intersection Flinders on St. the andwalkway Elizabethuntil St. you Walk west (to the walkway about meters of the bridge.ofContinue pass under left) on Flinders St. to at arrive at tram stopof4,Flinders “Elizabeth St.” Elizabeth stop on Flinders (not(to to the be train station and arrive the intersection St. and St. WalkSt.west confused with theSt. “Flinders St.”atstop Elizabeth St.) TakeSt.” tram number 70 to stop William left) on Flinders to arrive tramonstop 4, “Elizabeth stop on Flinders St. at (not to be Barak Bridge /Melbourne and on walk east. Or 48 to orstop 75 at to William stop at confused with the “Flinders Park St.” stop Elizabeth St.)take Taketram tram number number 70 Clarendon St/Wellington via tram Gate 6A (between light Barak Bridge /MelbourneParade Park and and walk walksouth. east. Enter Or take number 48 or 75 towers to stop3 & at 4). Use liftsSt/Wellington 14 & 15. Clarendon Parade and walk south. Enter via Gate 6A (between light towers 3 & 4). Use lifts 14 & 15. (2) Friday Conference Sessions (2) Friday Conference Sessions University House at the Woodward (Level 10) The Melbourne Law School University House at the Woodward (Level 10) 185 St. Law School The Pelham Melbourne 185 Pelham St. Suggested Transportation: From the Langham or Quay West, walk north along the Southbank Footbridge (not St. Kilda Suggested Transportation: Rd.), the river. Once across the north river, along turn right, and enter the underground walkway From and the cross Langham or Quay West, walk the Southbank Footbridge (not St. Kilda about 20 meters east of the bridge. theright, walkway untilthe youunderground pass under walkway the train Rd.), and cross the river. Once acrossContinue the river,on turn and enter station andmeters arrive east at theofintersection Flinderson St. the andwalkway Elizabethuntil St. You the tram stop about 20 the bridge. ofContinue youwill passsee under the train 16 Finance Down Under 2014 Building on the Best from the Cellars of Finance 1station "Flinders St" on at Elizabeth St. Takeoftram number 59 to tram "Haymarket" (dostop not and arrive the intersection Flinders St. 19 andorElizabeth St.stop You9 will see the tram 1 "Flinders St" on Elizabeth St. Take tram number 19 or 59 to tram stop 9 "Haymarket" (do not 4). Use lifts 14 & 15. (2) Friday Conference Sessions University House at the Woodward (Level 10) The Melbourne Law School 185 Pelham St. Suggested Transportation: From the Langham or Quay West, walk north along the Southbank Footbridge (not St. Kilda Rd.), and cross the river. Once across the river, turn right, and enter the underground walkway about 20 meters east of the bridge. Continue on the walkway until you pass under the train station and arrive at the intersection of Flinders St. and Elizabeth St. You will see the tram stop 1 "Flinders St" on Elizabeth St. Take tram number 19 or 59 to tram stop 9 "Haymarket" (do not take tram number 57). Head east on Pelham St. about 200 meters to arrive at the Melbourne Law at the intersection of Barry St.17 andSt. Pelham. is on the 10thMelbourne floor. take School tram number 57). Head east on Pelham about The 200 conference meters to arrive at the Law School at the intersection of Barry St. and Pelham. The conference is on the 10th floor. (3) Friday Reception (3) Friday Reception Eureka 89, Level 89 Eureka Tower, 7 Riverside Quay Eureka 89, Level 89 Eureka Tower, 7 Riverside Quay Suggested Transportation: From the Melbourne Law School, head west on Pelham St. toward Barry St. Turn left onto Suggested Transportation: Elizabeth to arriveLaw at tram stop head 9 “Haymarket”. Take any southbound to tram From the St. Melbourne School, west on Pelham St. toward Barrytram St. Turn leftstop onto1 "Flinders theatroad Flinders St. Train Station andsouthbound take the underground walkway Elizabeth St." St. toCross arrive tramtostop 9 “Haymarket”. Take any tram to tram stop 1 and pass under the train south Southbank Footbridge and cross walkway the river "Flinders St." Cross the station. road to Walk Flinders St.along Trainthe Station and take the underground awaypass from the the city.train Continue onto along Southgate Ave. At the roundabout onto and under station.straight Walk south the Southbank Footbridge andturn crossright the river Riverside PhDContinue student ambassadors guide conference members from turn the law away fromQuay. the city. straight ontowill Southgate Ave. At the roundabout rightschool onto to the reception. A limited number of taxiswill willguide be available if any conference has Riverside Quay. PhD student ambassadors conference members from participant the law school trouble walking.APlease conference committeeif any members or a participant PhD student to the reception. limited inform number the of taxis will be available conference has ambassador if you require taxi or alternative transportation. trouble walking. Please ainform the conference committee members or a PhD student ambassador if you require a taxi or alternative transportation. (4) Saturday Conference Special Session (4) Saturday Conference Special Session The University of Melbourne Basement Theatre (Level B1), The Spot Building The University of Melbourne 198 Berkeley St. (Level B1), The Spot Building Basement Theatre 198 Berkeley St. Suggested Transportation: From the Langham or Quay West, walk north along the footbridge (not St. Kilda Rd.), and Suggested Transportation: cross Onceoracross river,walk turnnorth right, along and enter the underground walkway aboutand 20 From the the river. Langham Quaythe West, the footbridge (not St. Kilda Rd.), metersthe East of the bridge. the right, walkway pass under the train station cross river. Once acrossContinue the river,onturn and until enter you the underground walkway aboutand 20 arrive atEast the of intersection Flinders on St. the andwalkway Elizabethuntil St. Across Flinders St., train you will see and the meters the bridge.ofContinue you pass under the station tram stop 1 "Flinders St".of Take tram number 19 or 59 north to tramFlinders stop 9 "Haymarket" arrive at the intersection Flinders St. and Elizabeth St. Across St., you will (do see not the take number 57). HeadSt". East on Pelham St. about "The Spot" by tram stop 1 "Flinders Take tram number 19 or100 59meters. north toYou tramwill stoprecognize 9 "Haymarket" (do not its spotted window Saturday session be held therecognize basement "The theatre. takeunique number 57). Head Easttint. on The Pelham St. about 100 will meters. Youinwill Spot" by its unique spotted window tint. The Saturday session will be held in the basement theatre. Finance Down Under 2014 Building on the Best from the Cellars of Finance 17 Stop 9 Haymarket Stop 3 Lincoln Square Stop 1 Flinders St Stop 4 Elizabeth St 18 Finance Down Under 2014 Building on the Best from the Cellars of Finance SATURDAY WINE TOUR/DINNER INFORMATION Mornington Peninsula Food and Wine Experience “Mornington Peninsula is a special place where vines thrive in sheltered undulating valleys nurtured by a maritime cool climate creating elegant, personality-packed award-winning wines - predominantly Pinot Noir and Chardonnay with Pinot Grigio and Shiraz a smaller presence. Mornington Peninsula's signature wine? It is supple & alluring, coaxing elegant and delicate varietal characters from the locally grown Pinot Noir. Appropriately, the region's wines show great finesse but don't be fooled by any apparent delicacy, as these wines are packed full of intensity, structure & texture. Less than an hour's drive south-east of Melbourne, the region now hosts 200 small-scale vineyards and more than 50 cellar doors offering visitors a personal warm welcome and taste of the region's diverse and impressive collection of fine wines” http://mpva.com.au 12:00pm Depart The University of Melbourne by luxury coach 1:00pm Lunch on the terrace at Green Olive Organic Farm “Our piece of paradise is 27 acres of red fertile soil that allows us to grow and produce premium quality food for our visitors to savor. You can enjoy the surrounds while eating and drinking some of the finest food the Mornington Peninsula has to offer. We grow olives, grapes, herbs and veggies, raise sheep and chooks and turn amazing produce from local farmers into a range of goodies you’ll love. Green Olive at Red Hill is a family business – we are; Greg and Sue O’Donoghue, our children Sam and Sophie, two Kelpies (Inca and Rasa), one Maremma (Pisa), 40 sheep, 60 chooks and Indian Runner Ducks!” http://www.greenolive.com.au/ 3:00pm Stop at Arthurs Seat Lookout for stunning views across Port Phillip Bay to Melbourne’s city skyline 4:00pm Pre-dinner wine tasting at Crittenden Estate “Garry and Rollo Crittenden are dedicated small scale vignerons with an exciting range of handcrafted wines. Today, their efforts are channelled into producing small batches of wines that elegantly and emphatically speak of their varietal and geographic provenance under the Crittenden Estate, Pinocchio and Geppetto ranges” http://crittendenwines.com.au/ 5:00pm Arrive for dinner at Tucks Ridge Estate “Tuck's Ridge is a small boutique winery located about 1.5 hrs from the Melbourne CBD. It is one of the oldest wineries in the region and benefits from this extended regional history to produce cool climate wines of stunning intensity, quality and longevity” http://www.tucksridge.com.au/ 7:30pm Depart for Melbourne Finance Down Under 2014 Building on the Best from the Cellars of Finance 19 PROGRAM COMMITTEE PROGRAM COMMITTEE Notes Renée B. Adams Renée B. Adams University of New South Wales University of New South Wales Anup Agrawal Anup Agrawal University of Alabama University Alabama George O.ofAragon George Aragon ArizonaO. State University Arizona State University Elena N. Asparouhova University of Utah Elena N. Asparouhova University of Utah Thomas W. Bates Arizona W. State University Thomas Bates Arizona State University Simon Benninga Tel Aviv University Simon Benninga Tel Aviv University Gennaro Bernile SingaporeBernile Management University Gennaro Singapore Management University Utpal Bhattacharya Indiana University Utpal Bhattacharya Indiana Audra University L. Boone Texas L. A&M University Audra Boone Texas University PeterA&M L. Bossaerts California Institute of Technology Peter L. Bossaerts Stephen J. Brownof Technology California Institute New York University Stephen J. Brown MaxYork Bruche New University CityBruche University London Max Sabrina Buti London City University University of Toronto Sabrina Buti David A. Chapman University of Toronto Boston College David A. Chapman Sudheer Chava Boston College Georgia Institute of Technology Sudheer Chava Peter Christoffersen Georgia Institute of Technology University of Toronto Peter Christoffersen Susan Christoffersen University of Toronto University of Toronto Susan Christoffersen Lauren H.ofCohen University Toronto Harvard Business School Lauren H. Cohen Francesca Cornelli Harvard Business School London Business School Francesca Cornelli Stephen G. Dimmock London Business School Nanyang Technological University Stephen G. Dimmock Robert F. Dittmar Nanyang Technological University University of Michigan Robert F. Dittmar Ran Duchin University of Michigan University of Washington Ran Duchin B. Espen Eckbo University Washington DartmouthofCollege B.Andrew Espen Eckbo Ellul Dartmouth College Indiana University Andrew Ellul Eliezer M. Fich Indiana Drexel University University Eliezer M.Z.Fich Murray Frank Drexel University University of Minnesota Murray Z. Frank University of Minnesota Mark J. Flannery Mark J. Flannery University of Florida University Florida Michael F.ofGallmeyer Michael F.of Gallmeyer University Virginia University of Virginia Simon Gervais Simon Gervais Duke University Duke University Ron Giammarino University of British Colombia Ron Giammarino University of British Colombia Todd A. Gormley University of Pennsylvania Todd A. Gormley University Pennsylvania Vidhan K.of Goyal HKUSTK. Goyal Vidhan HKUST Bruce D. Grundy University of Melbourne Bruce D. Grundy University Melbourne Roberto C.ofGutierrez University Oregon Roberto C.ofGutierrez University of Oregon Christian Heyerdahl-Larsen London Business School Christian Heyerdahl-Larsen London Business David A. Hsieh School Duke University David A. Hsieh EdithUniversity S. Hotchkiss Duke BostonS.College Edith Hotchkiss Zoran Ivković Boston College Michigan State University Zoran Ivković Kris Jacobs Michigan State University University Kris Jacobsof Houston Ravi Jagannathan University of Houston Northwestern University Ravi Jagannathan Shane A. Johnson Northwestern University Texas A&M University Shane A. Johnson Jennifer L. Juergens Texas A&M University Drexel University Jennifer L. Juergens MarcinUniversity T. Kacperczyk Drexel New York University Marcin T. Kacperczyk Robert A. University Korajczyk New York Northwestern University Robert A. Korajczyk Laura Lindsey Northwestern University Arizona State University Laura Lindsey Hong Liu Arizona State University Washington University St Louis Hong Liu Laura Xiaolei Liu Washington University St Louis HKUST Laura Xiaolei Liu Dmitry Livdan HKUST University of California, Berkeley Dmitry RichardLivdan Lowery University of California, Berkeley The University of Texas at Austin Richard MichelleLowery B. Lowry The of Texas at Austin The University Pennsylvania State University Michelle Lowry Deborah B. Lucas The Pennsylvania State of University Massachusetts Institute Technology Deborah ChristianLucas T. Lundblad Massachusetts Institute of Technology UNC Chapel Hill Christian T. Lundblad Craig MacKinlay UNC Chapel University of Hill Pennsylvania Craig MacKinlay21 20 Finance Down Under 2014 Building on the Best from the Cellars of Finance University of Pennsylvania 21 Robert L. McDonald Robert L. McDonald Northwestern University Northwestern Oyvind Norli University Oyvind NorliBusiness School BI Norwegian BI Norwegian Business School Kjell G. Nyborg Kjell G. Nyborg University of Zürich University of Zürich Micah S. Officer Loyola Micah Marymount S. Officer University LoyolaOsambela Marymount University Emilio Carnegie Mellon University Emilio Osambela CarnegieS.Mellon Bradley Paye University University Georgia Bradley S.ofPaye University Georgia Gordon M.of Phillips University ofPhillips Southern California Gordon M. University of Southern California Jeffrey E. Pontiff Boston JeffreyCollege E. Pontiff Boston College Uday Rajan University of Michigan Uday Rajan University of Michigan Krishna Ramaswamy University of Pennsylvania Krishna Ramaswamy Harley E. (Chip) Ryan Jr. University of Pennsylvania Georgia State University Harley E. (Chip) Ryan Jr. Jacob S. State Sagi University Georgia UNC JacobChapel S. SagiHill Michael J. Schill UNC Chapel Hill University Virginia Michael J.ofSchill Norman Schürhoff University of Virginia Université de Lausanne Norman Schürhoff Clemens Sialm Université de Lausanne The University of Texas at Austin Clemens Sialm Stephan Siegel of Texas at Austin The University University of Washington Stephan Siegel Tom M. Smith University of Washington University of Queensland Tom M. Smith Denis Sosyura University of Queensland University of Michigan Denis Sosyura Ajay Subramanian University of Michigan Georgia State University Ajay Subramanian Heather Tookes Georgia State University Yale University Heather Tookes Garry J. Twite Yale University The University of Texas at Austin Garry J. Twite Mitch Warachka The University of Texas at Austin Claremont McKenna College MitchYan Warachka Hong Claremont McKennaInstitute Collegeof Finance Shanghai Advanced Hong Yermack Yan David Shanghai New York Advanced UniversityInstitute of Finance David Yermack Fernando Zapatero New Yorkof University University Southern California Fernando Zapatero Guofu Zhou University of SouthernSt California Washington University Louis Guofu Zhou Washington University St Louis Notes Finance Down Under 2014 Building on the Best from the Cellars of Finance 21 CONTACT Conference Administrators AnnMaree Murray and Silvia Barberoglou Department of Finance Faculty of Business and Economics The University of Melbourne Parkville, VIC 3010, AUSTRALIA T: +61 3 8344 3538 | F: +61 3 8344 6914 fdu-conference@unimelb.edu.au http://fbe.unimelb.edu.au/finance/fdu Organizing Committee: Neal Galpin, Hae Won (Henny) Jung, Spencer Martin, and Jordan Neyland
