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Certification by analysts on a FinTech platform that harnesses the “wisdom of crowds” is associated with successful initial coin offerings (ICOs). We show that favorable ratings by a group of analysts with diverse backgrounds positively predict fundraising success and long-run token performance. Analysts’ ratings also help detect potential fraud ex ante. We document that analysts have career concerns and are incentivized by the platform to issue informative ratings. Overall, our results suggest that a market-based certification process that relies on a diverse group of individuals is at play in financing blockchain startups. (JEL D82, G11, G24, G32, G34, L26).

We show that endogenous information signaling in the CDS market, together with sluggish updates on corporate credit ratings assigned by major rating agencies, creates anomalies such as return momentum within the CDS market and across CDS-to-stock return momentum. Using 5-year credit default swap (CDS) contracts on 1,247 U.S. firms from 2003 to 2011, a three-month formation and one-month holding period CDS momentum strategy yields 52 bps per month with a Sharpe ratio of 0.423. The performance is better for entities with lower credit ratings (83 bps per month), high CDS depth (80 bps per month), and during the financial crisis (97 bps per month). Furthermore, our cross-market tests show that by incorporating past CDS returns into the stock momentum portfolio formation process, traditional stock momentum strategies avoid abrupt losses during the crisis period and improve their performance by a net of 104 bps per month. This joint-market momentum strategy is particularly profitable for entities with high CDS depth. Importantly, we show that both within the CDS market and CDS-to-stock joint-market, momentum profits exist because CDS returns correctly anticipate future credit rating changes. This mechanism completely differentiates CDS momentum from bond return momentum.

We analyze the impact of the introduction of credit default swaps (CDSs) on real decision-making within the firm. Our structural model predicts that CDS introduction increases debt capacity more when uncertainty about the credit events that trigger CDS payment is lower. Using a sample of more than 56,000 firms across 51 countries, we find that CDSs increase leverage more in legal and market environments where uncertainty about CDS obligations is reduced and when property rights are weaker. Our results highlight the importance of legal uncertainty in the interpretation of the underlying trigger events of global credit derivatives.

We find that credit default swap (CDS) spreads contribute significantly to price discovery in financial markets when firm-specific credit information is prominent. Using 3,470 S&P rating notch and watch changes for US public and private entities from 2001–2013, we show that CDS prices contain unique firm credit risk information that is not captured by the prices of other related securities such as stocks and bonds of the same firm. Credit information unidirectionally flows from CDS to bonds, particularly for private entities whose stocks are not concurrently trading in markets. We further find that CDS returns significantly predict stock returns, particularly their idiosyncratic components.

We show that banks with shared social connections partner more often in the global syndicated loan market and that central banks in the network play dominant roles in various interbank transactions, indicating that social connections facilitate business connections. However, more centralized banks in the network also contribute significantly to the global systemic risk. Moreover, we find the soft information generated by social networks is particularly valuable when potential partners operate under different accounting and regulatory standards. Finally, we show that the recent banking crisis significantly limited the positive soft information effects of social networks in the global banking system.

Using five-year credit default swap (CDS) spreads on 2,364 companies in 54 countries from 2004 to 2011, we find that firms exposed to stronger property rights through their foreign asset positions (institutional channel) and firms cross-listed on exchanges with stricter disclosure requirements (informational channel) reduce their CDS spreads by 40 bps for a one-standard-deviation increase in their exposure to the two channels. These channels capture effects beyond those associated with firm- and country-level fundamentals. Overall, we find that firm-level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.

Politicians preferentially treat firms in their electoral districts. We develop a model of home bias, which shows that a politician with limited political capacity grants a favor to local firms over non-local firms to satisfy voters and induce (re-)elections. We identify domestic firms that run business in politicians' constituency as local firms, while foreign firms with little economic exposure in the constituency as non-local firms. Using 1% close congressional elections from 1997 to 2014, we find that a narrow victory of connected politicians results in a 17 to 23 percent increase in value for local firms, whereas only a 4 to 12 percent increase in value for foreign firms. The results are evident when connected politicians are house representatives, who run elections in economically distressed states with high corruptions during the post-2007 financial crisis period. Our results are robust to controlling for heterogeneous U.S. economic exposures of foreign firms.

Certification by analysts on a FinTech platform that harnesses the "wisdom of crowds" is associated with successful initial coin offerings (ICOs). We show that favorable ratings by a group of analysts with diverse backgrounds positively predict fundraising success and long-run token performance. Analyst ratings also help detect potential fraud ex ante. We document that analysts have career concerns and are incentivized by the platform to issue informative ratings. Overall, our results suggest that a market-based certification process that relies on a diverse group of individuals is at play in financing blockchain startups.

Using a simple cheap-talk game, we theoretically demonstrate that corporate social responsibility (CSR) helps mitigate the CEO-board information asymmetry, leading to more informed advising and monitoring by the board. By optimally engaging in CSR, the board can take advantage of stakeholder information revelation and reduce its informational dependence on the CEO, which enables the shareholders to choose an ex ante higher level of board independence. For a sample of U.S. firms between 1999 and 2013, we find strong support for this strategic complementarity between board independence and the information value of CSR. Our results highlight a novel rationale for CSR – the information motive.

We analyze the impact of the introduction of credit default swaps (CDS) on real decision making within the firm, taking into consideration differences in firms’ local economic and legal environments. We extend the model of Bolton and Oehmke (2011) to take into account uncertainty whether the actions taken by the reference entity will trigger credit events for the CDS obligations. We test the predictions of the model in a sample of more than 56,000 firms across 50 countries over the period 2001–2015 and find substantial evidence that the introduction of CDS affects real decisions within the firm, including those regarding leverage, investment, and the riskiness of the firm’s investments. Importantly, we find that the legal and market environments in which the reference entity operates have an influence on the impact of CDS. The effect of CDS is larger in environments where uncertainty regarding CDS obligations is reduced and where CDS mitigate weak property rights. Our results shed light on the incomplete nature of CDS contracts in international capital markets, related to significant legal uncertainty surrounding the interpretation of underlying credit events.

Using novel inter-firm patent litigation data, we show a significant interplay between intellectual property rights’ boundaries and product market dynamics. Instrumenting a firm’s patent litigation propensity with the passage of China’s National Intellectual Property Strategy reform, we find that patent litigation reduces defendant firms’ innovation activity and fosters more exploitative innovations. The effects strengthen with product market overlap between litigants. We further find that patent litigation intensifies product market competition among close rivals and results in lower and more disperse innovation activities within industry, implying an industry structure where Schumpeterian effect of competition is more likely.

We show in a theoretical model that credit default swaps induce managerial agency problems through two channels: reducing the opportunity for managers to transfer value to equityholders from creditors via strategic default, and reducing the intensity of monitoring by creditors, which leads to greater CEO diversion of assets as perquisites. We further show that boards can use compensation awards that increase managerial performance incentives (delta) and risk-taking incentives (vega) in order to mitigate these two agency problems, with increases in managerial vega being particularly useful to alleviate the strategic default-related agency problem. We study equity compensation awards to CEOs of S&P 1500 companies during 2001–2015 and find that they occur in patterns consistent with these predictions.

For 2,695 US corporations from 1996 to 2009, we find that alignment in political orientation between the chief executive officer (CEO) and independent directors is associated with lower firm valuations, lower operating profitability, and increased internal agency conflicts such as a reduced likelihood of dismissing poorly performing CEOs, a lower CEO pay-performance sensitivity, and a greater likelihood of accounting fraud. Importantly, we show that our results are driven neither by the effects associated with various measures of similarity and diversity within the board nor the effects of local director labor market and political conditions on board structure. We provide evidence that our measure of individual political orientation reflects the person׳s political beliefs rather than opportunistic attempts to seek political favor. Overall, our results suggest that diversity in political beliefs among corporate board members is valuable.

Using novel data on detailed country-level sales exposures of U.S. multinational companies (MNCs) and unique identification strategies, we show that international cash flow diversification enhances firm debt capacity, but the magnitude of this effect varies with the innate country institutional frictions to which the firm is exposed. We find that a one standard deviation increase in MNC across-country cash flow diversification results in a 5 percent increase in firm leverage from its sample average. However, across-country institutional quality and tax frictions reduce the MNC geographic diversification benefit by 27 to 55 percent from the debt capacity enhancement without such frictions.

We show in a theoretical model that credit default swaps induce managerial agency problems through two channels: reducing the opportunity for managers to transfer value to equityholders from creditors via strategic default, and reducing the intensity of monitoring by creditors, which leads to greater CEO diversion of assets as perquisites. We further show that boards can use compensation awards that increase managerial performance incentives (delta) and risk-taking incentives (vega) in order to mitigate these two agency problems, with increases in managerial vega being particularly useful to alleviate the strategic default-related agency problem. We study equity compensation awards to CEOs of S&P 1500 companies during 2001-2015 and find that they occur in patterns consistent with these predictions.

We find that CDS spreads contribute significantly to price discovery in financial markets when firm-specific credit information is prominent. Using 3,470 S&P rating notch and watch changes for U.S. public and private entities from 2001-2013, we show that CDS prices contain unique firm credit risk information that is not captured by the prices of other related securities such as stock and bonds of the same firm. Credit information unidirectionally flows from CDS to bonds, particularly for private entities whose stocks are not concurrently trading in markets. We further find that CDS returns significantly predict stock returns, particularly their idiosyncratic components.

In this paper, we show that a true measure of board independence requires a careful disentangling of both the functioning role of gray directors and the firm’s decision on whether to classify former employees as independent or gray. By reclassifying gray directors, we find that the likelihood of fraud significantly increases when a firm has former employees serving on its board of directors. These effects are particularly strong when these former employee directors have previously served with the current CEO, or when they assume important monitoring responsibilities by serving on the auditing and compensation committees. By contrast, we find that other “outside” gray directors are less associated with fraud. In this regard, we demonstrate that gray directors are not a monolithic group, and that there are important “shades of gray.” Given this perspective, we construct a novel measure of a board’s functioning independence. In a broad series of empirical tests, we demonstrate that while there is no significant link between the traditional measure of independence and corporate fraud, there is a strong link between our measure of functional independence and the likelihood of fraud. We also demonstrate that fraud is more likely to occur when a firm uses its discretion to classify a former employee as an independent director. We argue that this is a relevant indicator of the firm’s relative conservatism, which is shown to be negatively correlated with the likelihood of fraud.

We document that related securities linked through firm fundamentals provide important cross-market return performance information. Using 1,074 firms during 2003-2014, we find stock return momentum for “joint” winners/losers whose past stock and CDS returns are in congruence, whereas return reversal for “disjoint” entities whose past stock returns disagree with their past CDS returns. Stock strategies combining momentum on joint winners/losers with contrarian on disjoint winners/losers outperform traditional stock momentum by 132 bps per month with an annualized Sharpe ratio of 1.11. Relative pricing of credit across related securities explains, in part, the cross-section of stock return momentum.

We study the impact of succession tournaments on risk-taking in family firms. More sons (less daughters) in controlling families are associated with higher income volatility and lower performance – especially, in opaque private firms with pyramidal ownership structure. Contestants exhibit managerial myopia such as higher dividend payouts and less R&D investments. Overall, succession tournaments induce risk-taking and managerial myopia among sons, but positive externalities through marriages (sons-in-law) mitigate these concerns. Using the sudden death of a chairman as an exogenous shock to a succession tournament, we confirm a causal link between increased competition among succession contestants and corporate risk-taking.

We investigated the effects of the aqueous extract of Solanum lyratum THUNB. (Solanaceae) (SLAE) on the anaphylactic reactions. SLAE inhibited compound 48/80-induced anaphylactic shock 100% with a dose of 1.0 mg/g body weight (BW). When SLAE was pretreated at concentration ranging from 0.0001-1.0 mg/g BW, the serum histamine levels were reduced in a dose-dependent manner. Passive cutaneous anaphylaxis also inhibited to 69.3% by oral administration of SLAE (0.05 mg/g BW). Moreover, SLAE dose-dependently inhibited the histamine release from the rat peritoneal mast cells (RPMC) by compound 48/80. The level of cAMP in RPMC, when SLAE was added, significantly increased compared with that of normal control. These results indicate that SLAE possess strong antianaphylactic activity.

This Internet Appendix provides supplementary results to the main analyses in "Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk" by Lee, Naranjo, and Sirmans (2014).The paper to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=2492204

Using 5-year credit default swap (CDS) spreads on 2,364 companies in 54 countries during 2004-2011, we show firms exposed to better property rights institutions through their foreign asset positions (Institutional channel) and firms whose stocks are cross-listed on exchanges with stricter disclosure requirements (Informational channel) reduce their CDS spreads by 40 bps for a one standard deviation increase in their exposure on the two channels. These channels capture distinct effects beyond those associated with firm- and country-level fundamentals. Overall, we find that firm-level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2492206

This paper examines sovereign ceiling violations (SCVs) in credit default swap (CDS) markets, whereby private sector firms have lower CDS spreads relative to their sovereign counterparts with equal contractual terms. Using 5-year CDS spreads on 2,364 companies in 54 countries during 2004-2011, we find that firms exposed to better property rights institutions through their foreign asset positions (Institutional channel) and firms whose stocks are listed on exchanges with stricter disclosure requirements (Informational channel) tend to violate the sovereign ceiling rule. Our results suggest that firm-level global asset and information connections are important mechanisms to delink firms from their sovereign risk.

Using economic deregulation as a quasi-natural experiment for increasing product market competition, we find increases in earnings manipulation and accounting frauds following deregulation. This “dark-side” of product market competition is particularly evident for deregulated firms in high market-to-book industries, where we find evidence of short-termism in the capital market. We further find that firms in these industries, if actively manage earnings, tend to make more acquisitions and have higher survival rates. Overall, our results are largely consistent with Shleifer (2004), who predicts an important interplay between product market competition and capital market valuation feedback that could induce misbehaving incentives among firms in competitive industries.

For 2,695 US corporations from 1996 to 2009, we find that alignment in political orientation between the chief executive officer (CEO) and independent directors is associated with lower firm valuations, lower operating profitability, and increased internal agency conflicts such as a reduced likelihood of dismissing poorly performing CEOs, a lower CEO pay-performance sensitivity, and a greater likelihood of accounting fraud. Importantly, we show that our results are driven neither by the effects associated with various measures of similarity and diversity within the board nor the effects of local director labor market and political conditions on board structure. We provide evidence that our measure of individual political orientation reflects the person’s political beliefs rather than opportunistic attempts to seek political favor. Overall, our results suggest that diversity in political beliefs among corporate board members is valuable.

This paper investigates empirically the impact on leverage of the two temporal dimensions of cash flows: duration and persistence. We propose a novel estimation of these temporal characteristics, utilizing the return decomposition based on the vector autoregressive (VAR) method and the data on the market values of firms' assets. The key intuition for the estimation is that persistence is the sensitivity of market prices to cash flow shocks and duration is the sensitivity to discount rate shocks. Using these novel measures, we find evidence supporting recent developments in capital structure theory such as Gorbenko and Strebulaev (2010) and Hennessy (2004). First, firms with temporary shocks have low leverage, especially for small and financially constrained firms. Although less important unconditionally, permanent shocks' effect on leverage can be amplified, if they covary negatively with future discount rate shocks. Second, firms with long duration cash flow streams maintain low leverage and invest less in fixed assets, consistent with the notion that long asset life exacerbates debt overhang problems because default truncates future cash flows.

I present a theory of how capital structure and control structure co-vary in business groups. A controlling party of a business group adopts the pyramidal structure with excess internal capital to overcome restrictions on external financing imposed by control benefits. External financing capacity of the pyramid is maximal when highly leveraged parent firms are financially supported by the dividends of low-leveraged subsidiaries, which further promotes the pyramid. In contrast, business groups without this control constraint are horizontal and highly leveraged, facilitating the maximization of security cash flow benefits. These predictions are empirically confirmed for Korean family business groups.

Investigation of the radial scale effect on low-power cylindrical Hall thrusters has been undertaken by comparing the thrusters with three different channel diameters of 28, 40, and 50 mm. The investigation found that both the anode efficiency and the thrust of the larger thruster are higher as the anode power is raised. On the other hand, higher current and propellant utilizations are achieved for the smaller thruster, which is due to higher neutral density and better electron confinement. The large plume angle of the small cylindrical Hall thruster causes thrust loss, resulting in the reduction of anode efficiency.

Performance characteristics of a cylindrical Hall thruster depending on the depth of the annular region (La) in front of the anode were investigated. The effect of the annular region was examined by operating thrusters corresponding to four different values of La (0, 4, 6, and 10 mm) and a fixed length of the cylindrical region (25 mm). Various measurements such as electron and ion currents, thrust, anode efficiency, current and propellant utilizations, and ion energy distribution functions were performed. Such measurements lead to an interpretation that (1) a considerable potential difference may exist between the anode and the ionization region, which is presumably located near the end of the annular region where magnetic field lines converge; (2) this potential difference increases with respect to increasing La; and (3) the presence of the annular region near the anode reduces the specific impulse and anode efficiency for the examined thrusters.

Performance characteristics of low power cylindrical Hall thrusters are investigated in terms of the length of the discharge channel. Thrust, efficiency, discharge current, and propellant utilization are evaluated for different channel lengths of 19, 22, and 25 mm. It is found that the propellant utilization and ion energy distribution function are strongly associated with the channel length. Increase of thrust and efficiency are also found with increasing channel lengths. These characteristics of the thruster are interpreted with possible generation of multi-charged ions due to increased residing time within the extended space inside the channel.