We find that returns to momentum investing are higher among high idiosyncratic volatility (IVol) stocks, especially high IVol losers. Higher IVol stocks also experience quicker and larger reversals. The findings are consistent with momentum profits being attributable to underreaction to firm-specific information and with IVol limiting arbitrage of the momentum effect. We also find a positive time-series relation between momentum returns and aggregate IVol. Given the long-term rise in IVol, this result helps explain the persistence of momentum profits since Jegadeesh and Titman's (1993) Arena et al./The Financial Review 43 (2008) 159-190
This study examines the phenomenon of co-CEOs within publicly traded firms. Although shared executive leadership is not widespread, it occurs within some very prominent firms. We find that co-CEOs generally complement each other in terms of educational background or executive responsibilities. Our results show that firms most likely to appoint co-CEOs have lower leverage, a more limited firm focus, less independent board structure, fewer advising directors, lower institutional ownership, and greater levels of merger activity. The governance structure of co-CEO firms suggests that co-CEOships can serve as an alternative governance mechanism, with co-CEO mutual monitoring substituting for board or external monitoring and co-CEO complementary skills substituting for board advising. An event study indicates that * Corresponding address:We would like to thank an anonymous referee, Robert Van Ness (the editor), Ron Masulis, Sarah Peck, Michaël Dewally, and seminar participants at Marquette University and the 2008 FMA annual meeting for helpful comments and suggestions. We also wish to thank Chris Tamm, Jim Calhoun, Stacy Thorsen, Jiri Tresl, and Dongmei Zhao for their valuable research assistance. C 2011, The Eastern Finance Association 385 386 M. P. Arena et al./The Financial Review 46 (2011) 385-412the market reacts positively to appointments of co-CEOs while a propensity score analysis shows that the presence of co-CEOs increases firm valuation.
This study examines the influence of a firm's geographical location on corporate debt and provides evidence that the higher cost of collecting information on firms distant from urban areas has significant implications on a wide array of corporate debt characteristics. We find that rural firms face higher debt yield spreads and attract smaller and less prestigious bank syndicates than urban firms. Rural firms attempt to reduce their informational disadvantage by relying more on relationship banking. Our results on the effect of location on corporate debt are robust to the inclusion of an extensive set of firm and issue characteristics.JEL classification: G32; G21; G24
The risk of securities class action litigation alters corporate savings and investment policy. Firms with greater exposure to securities litigation hold significantly more cash in anticipation of future settlements and other related costs. The result is due to firms accumulating cash in anticipation of lawsuits and not a consequence of plaintiffs targeting firms with high cash levels. The market value of cash is lower for firms exposed to litigation risk. Corporate investment decisions are also affected by litigation risk, as firms reduce capital expenditures in response. Our results are robust to endogeneity concerns and possible spurious temporal effects.
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