The Journal of Finance

The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.

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Search results: 5.

Does Poor Performance Damage the Reputation of Financial Intermediaries? Evidence from the Loan Syndication Market

Published: 11/14/2011   |   DOI: 10.1111/j.1540-6261.2011.01692.x

RADHAKRISHNAN GOPALAN, VIKRAM NANDA, VIJAY YERRAMILLI

We investigate the effect of poor performance on financial intermediary reputation by estimating the effect of large‐scale bankruptcies among a lead arranger's borrowers on its subsequent syndication activity. Consistent with reputation damage, such lead arrangers retain larger fractions of the loans they syndicate, are less likely to syndicate loans, and are less likely to attract participant lenders. The consequences are more severe when borrower bankruptcies suggest inadequate screening or monitoring by the lead arranger. However, the effect of borrower bankruptcies on syndication activity is not present among dominant lead arrangers, and is weak in years in which many lead arrangers experience borrower bankruptcies.


The Entrepreneur's Choice between Private and Public Ownership

Published: 03/09/2006   |   DOI: 10.1111/j.1540-6261.2006.00855.x

ARNOUD W. A. BOOT, RADHAKRISHNAN GOPALAN, ANJAN V. THAKOR

We analyze an entrepreneur/manager's choice between private and public ownership. The manager needs decision‐making autonomy to optimally manage the firm and thus trades off an endogenized control preference against the higher cost of capital accompanying greater managerial autonomy. Investors need liquid ownership stakes. Public capital markets provide liquidity, but stipulate corporate governance that imposes generic exogenous controls, so the manager may not attain the desired trade‐off between autonomy and the cost of capital. In contrast, private ownership provides the desired trade‐off through precisely calibrated contracting, but creates illiquid ownership. Exploring this tension generates new predictions.


Market Liquidity, Investor Participation, and Managerial Autonomy: Why Do Firms Go Private?

Published: 07/19/2008   |   DOI: 10.1111/j.1540-6261.2008.01380.x

ARNOUD W. A. BOOT, RADHAKRISHNAN GOPALAN, ANJAN V. THAKOR

We focus on public‐market investor participation to analyze the firm's decision to stay public or go private. The liquidity of public ownership is both a blessing and a curse: It lowers the cost of capital, but also introduces volatility in a firm's shareholder base, exposing management to uncertainty regarding shareholder intervention in management decisions, thereby affecting the manager's perceived decision‐making autonomy and curtailing managerial inputs. We extract predictions about how investor participation affects stock price level and volatility and the public firm's incentives to go private, providing a link between investor participation and firm participation in public markets.


Duration of Executive Compensation

Published: 07/26/2013   |   DOI: 10.1111/jofi.12085

RADHAKRISHNAN GOPALAN, TODD MILBOURN, FENGHUA SONG, ANJAN V. THAKOR

Extensive discussions on the inefficiencies of “short‐termism” in executive compensation notwithstanding, little is known empirically about the extent of such short‐termism. We develop a novel measure of executive pay duration that reflects the vesting periods of different pay components, thereby quantifying the extent to which compensation is short‐term. We calculate pay duration in various industries and document its correlation with firm characteristics. Pay duration is longer in firms with more growth opportunities, more long‐term assets, greater R&D intensity, lower risk, and better recent stock performance. Longer CEO pay duration is negatively related to the extent of earnings‐increasing accruals.


Aversion to Student Debt? Evidence from Low‐Wage Workers

Published: 12/08/2023   |   DOI: 10.1111/jofi.13297

RADHAKRISHNAN GOPALAN, BARTON H. HAMILTON, JORGE SABAT, DAVID SOVICH

We combine state minimum wage changes with individual‐level income and credit data to estimate the effect of wage gains on the debt of low‐wage workers. In the three years following a $0.88 minimum wage increase, low‐wage workers experience a $2,712 income increase and a $856 decrease in debt. The entire decline in debt comes from less student loan borrowing among enrolled college students. Credit constraints, buffer‐stock behavior, and other rational channels cannot explain the reduction in student debt. Our results are consistent with students perceiving a utility cost of borrowing student debt arising from mental accounting.