顶刊速览|Journal of Banking and Finance 2025年第10期

• Drought, water, and the valuation of hydropower assets

• The up side of being down: Depression and crowdsourced forecasts

• Authorized participants’ regulatory constraints and limits to ETF arbitrage during market turmoil Evidence from the dash-for-cash episode

• Board gender diversity and equity-based compensation

• Money Market Funds vulnerabilities and systemic liquidity crises

• V-shapes

• The inevitable disclosure doctrine: A facade or a curse in the CEO labor market

• Investor attention and stock price manipulation: Evidence from daily quasi-natural experiments

  
  

Isabel Figuerola-Ferretti,Eduardo Schwartz,Ignacio Segarra

Abstract:The increased impact of extreme weather events and droughts has prompted the rapid growth of the water market. This paper develops a real options valuation model for a hydropower plant that incorporates uncertainty in water and electricity prices, water inflows, and drought severity. Using a stochastic optimal control framework, the model is calibrated with monthly data from a reservoir in California. Water inflow and prices are modeled as functions of the California Drought Severity Index. Results highlight strong seasonality and uncertainty in price dynamics and show that revenues from water rights trading are highly sensitive to climate conditions. The model provides a comprehensive understanding into managing and valuing hydropower reservoirs under volatile environmental and market conditions.

Sima Jannati,Sarah Khalaf,Du Nguyen

Abstract:This study examines the role of non-severe depression as a psychological anchor against overoptimism. Using earnings forecasts from Estimize, we find that an increase in the proportion of the U.S. population with depression is associated with improved forecast accuracy among users. This effect is concentrated among forecasts that are optimistic and analysts who take longer time to issue forecasts, highlighting reduced optimism and slow information processing as economic mechanisms that explain our results. We also show that this effect is distinct from the influence of temporary seasonal depression or other sentiment measures on decision-making. Overall, our research establishes a link between depression and crowdsourced financial evaluations.

Claudio E. Raddatz K.

Abstract:This paper shows that authorized participants’ (APs) regulatory constraints weakened the arbitrage relationship between bond ETFs’ primary market activity and their premia during the market turmoil triggered by the dash-for-cash episode in March 2020. Arbitrage activity weakened more severely when those APs with a history of creating or redeeming an ETF’s shares had low regulatory capital ratios, consistent with persistence in arbitrage activity. The results also reveal that the direction of prior arbitrage activity matters, and show that the decline in arbitrage intensity was especially pronounced for ETFs holding less liquid bonds, whose lead market makers had lower regulatory capital ratios, and for those associated with non-bank-affiliated APs. Finally, the paper provides a novel estimate of the elasticity of primary market activity to ETF premia, contributing to the literature on limits to arbitrage and intermediary frictions.

Matthew Imes,Kose John,Kyeong Hun Lee,Amir Shoham,Emma Xu

Abstract:We examine the impact of board gender diversity on equity-based compensation in executive pay. We show that the presence of female directors is associated with lower equity-based compensation in executive pay—particularly when female directors serve on compensation committees or when boards are dominated by insiders. Our findings support the view that female directors serve as effective monitors, potentially substituting for other corporate governance mechanisms, such as incentive-based pay and board independence. Our results are not driven by lower pay-for-performance sensitivity induced by poor stock performance. We do not find evidence consistent with risk-aversion on the part of female directors.

Michel Baes,Antoine Bouveret,Eric Schaanning

Abstract:Despite regulatory reforms, Money Market Funds (MMFs) experienced severe stress in March 2020, following large redemptions and dislocations in short-term markets. We provide a model showing the trade-offs between liquidity and capital preservation services offered by MMFs. We show that in a crisis, MMFs cannot provide liquidity and capital preservation to investors at the same time. As a result, investors have an incentive to run pre-emptively. We calibrate our model on data from USD MMFs and find that most funds would have been unable to meet redemptions above 30% mid-March 2020. Unless short-term funding markets are made resilient in times of stress, MMFs will face similar challenges during future liquidity crises.

Maria Flora,Roberto Renò 

Abstract:We present a methodology for detecting flash crashes by identifying short-term V-shaped price reversals. Our approach, based on drift burst test statistics, aligns with the SEC’s forensic definition of market access rule violations, highlighting its potential as a market surveillance tool. Flash crashes have become more frequent over the past decade and are typically accompanied by high volumes, high volatility, and an increase in odd-lot trades. They are more likely to occur following periods of high volumes, elevated price impact, low volatility, and heightened algorithmic activity.

Hung-Gay Fung,Tongxia Li,Chun Lu,Min-Ming Wen 

Abstract:Our study examines how the adoption of the inevitable disclosure doctrine (IDD) across US state courts affects the relationship between leverage and CEO compensation. We find that the IDD adoption significantly attenuates the typically positive association between leverage and CEO pay. This effect is more pronounced for CEOs with higher ex-ante mobility, greater career concerns, weaker organizational influence, and higher firm-specific skills. Rejecting the IDD, on the other hand, amplifies the positive relationship between leverage and CEO pay. Our findings underscore the influence of labor market dynamics on CEO compensation.

Zhibing Li,Jia Liu , Jie Liu,Xiaoyu Liu,Chonglin Wu 

Abstract:This study investigates the impact of heightened investor attention on stock price manipulation. To establish causality, we employ daily repeated quasi-natural experiments, where investors’ attention is influenced exogenously by price rounding rather than by stocks’ fundamental information. Our findings demonstrate that stocks included in the Winner List attract significant investor attention, which leads to increased stock price manipulation. A two-stage channel analysis reveals that this increased investor attention exacerbates stock price manipulation through noise trading. Moreover, the positive relationship between investor attention and stock price manipulation is more pronounced in stocks with higher firm-specific information asymmetry, fewer rational investors, weaker external monitoring, higher costs of arbitrage, and non-shortability. Additional analyses indicate that this positive relationship intensifies during periods of heightened investor sentiment, greater economic policy uncertainty, and increased geopolitical risk. Our study provides original evidence that the saliency of information exacerbates stock price manipulation and destabilizes financial markets.