Finance Publications

Specialization and performance in private equity: Evidence from the hotel industry.

Erik William Jeffries — Thu, 19 Dec 2024 19:42:28 +0000

Specialization and performance in private equity: Evidence from the hotel industry. Erik William J… Thu, 12/19/2024 - 12:42

Spaenjers, Christophe; Steiner, Eva. Specialization and performance in private equity: Evidence from the hotel industry. Journal of Financial Economics. Dec2024, Vol. 162, pN.PAG-N.PAG.

Using granular data on U.S. hotel investments over the past two decades, we show that industry-specialist PE firms achieve higher net income from operations and higher capital gains from sale than generalist PE firms for comparable properties. Those results are driven by specialists implementing more and larger cost savings without compromising revenues. Fundamentally, specialists utilize their hotel-specific operating expertise to produce superior performance outcomes. We show that specialists across investment sectors possess deeper industry-specific operating expertise. Our results suggest that specialist PE firms can compete with their generalist rivals by leveraging such expertise in a chosen market niche.

https://www.sciencedirect.com/science/article/pii/S0304405X24001533

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Broken promises, competition, and capital allocation in the mutual fund industry

Erik William Jeffries — Wed, 11 Dec 2024 02:03:03 +0000

Broken promises, competition, and capital allocation in the mutual fund industry Erik William J… Tue, 12/10/2024 - 19:03

What characteristics of mutual funds do investors care about? In addition to performance and fees, we show that investors exhibit a clear preference for managers who adhere to the strategies they describe in their prospectuses. Capital flows respond negatively when funds diverge from the average holdings of their text-based strategy peer groups, but positively when they outperform those peer averages. We identify this effect using a novel instrumental variables approach, and show that funds face a delicate trade-off between keeping their promises and outperforming their peers who make similar promises."

Abis, Simona; Lines, Anton. Broken promises, competition, and capital allocation in the mutual fund industry. Journal of Financial Economics. Dec2024, Vol. 162, pN.PAG-N.PAG.

https://www.sciencedirect.com/science/article/pii/S0304405X24001715

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Specialization and performance in private equity: Evidence from the hotel industry

Erik William Jeffries — Wed, 11 Dec 2024 02:00:44 +0000

Specialization and performance in private equity: Evidence from the hotel industry Erik William J… Tue, 12/10/2024 - 19:00

Spaenjers, Christophe; Steiner, Eva. Specialization and performance in private equity: Evidence from the hotel industry. Journal of Financial Economics. Dec2024, Vol. 162, pN.PAG-N.PAG.

https://www.sciencedirect.com/science/article/pii/S0304405X24001533

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Norms, institutions, and digital veils of uncertainty—Do network protocols need trust anyway?

Erik William Jeffries — Wed, 11 Sep 2024 00:23:38 +0000

Norms, institutions, and digital veils of uncertainty—Do network protocols need trust anyway? Erik William J… Tue, 09/10/2024 - 18:23

In large and complex human groups, social rules reduce individuals' uncertainty about their own choice set, including through these rules' simultaneous influence on the choice set of other individuals. But uncertainty varies as to the extent to which it is knowable and quantifiable ex ante. Therefore, different classes of social rules deal with the future uncertainty of individuals' conduct in structurally distinct ways, with institutions and norms being the hallmark example of this distinction. Institutions, through their costly definition and enforcement by a known organization, require specific delineation of behavior and penalties ex ante, meaning they of necessity confront “known unknowns” (risk), or the conduct of members of an organization that can be predicted ex ante. Norms, in contrast, are only effective in shaping behavior if sufficiently shared within a community, which means their application is automatic in expectation to an individual ordering their conduct considering potential norms. This makes norms apply to ex ante known and unknown situations alike, relative to the precision that the articulation of institutions requires with respect to human behavior. Although digital governance carries the benefits (and costs) of considerable institutional “completeness,” governance by protocol is nonetheless incomplete in the face of the complex set of exogenous shocks and human actions that a given digital networked organization will experience. This means digital institutions need to mimic the adaptability of institutions more generally, through the institutional mechanisms of flexibility detailed in this analysis. More generally, though, the fact that norms can serve as a complementary gap‐filler in contexts where institutions do not reach suggest that digital organization designers cannot avoid simultaneous consideration of the human community of network users that will define the norms that become crucial in periods of true uncertainty for any organization.

Alston, Eric. Norms, institutions, and digital veils of uncertainty—Do network protocols need trust anyway? Regulation & Governance. Sep2024, p1.

https://onlinelibrary.wiley.com/doi/full/10.1111/rego.12628

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Blood Money: Selling Plasma to Avoid High-Interest Loans.

Erik William Jeffries — Tue, 10 Sep 2024 21:41:08 +0000

Blood Money: Selling Plasma to Avoid High-Interest Loans. Erik William J… Tue, 09/10/2024 - 15:41

Little is known about the motivations and outcomes of sellers in remunerated markets for human materials. We exploit dramatic growth in the U.S. blood plasma industry to shed light on the sellers of plasma. Sellers tend to be young and liquidity-constrained with low incomes and limited access to traditional credit. Plasma centers absorb demand for nontraditional credit. After a plasma center opens nearby, demand for payday loans falls by over 13% among young borrowers. Meanwhile, foot traffic increases by over 4% at nearby stores, suggesting that constrained households use plasma markets to smooth consumption without appealing to high-cost debt.

Dooley, John M; Gallagher, Emily A. Blood Money: Selling Plasma to Avoid High-Interest Loans. Review of Financial Studies. Sep2024, Vol. 37 Issue 9, p2779-2816.

https://academic.oup.com/rfs/article/37/9/2779/7663472

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Friends During Hard Times: Evidence from the Great Depression

Erik William Jeffries — Tue, 10 Sep 2024 21:37:44 +0000

Friends During Hard Times: Evidence from the Great Depression Erik William J… Tue, 09/10/2024 - 15:37

Using a novel data set of over 3,500 public and private firms, we construct the network of executive and director connections prior to the 1929 financial market crash. We find that more connected firms have 17% higher 10-year survival rates. Consistent with a working capital channel, the results are strongest for small, private, cash-poor firms, and firms located in counties with high bank suspension rates. Moreover, connections to cash-rich firms that increase accounts receivable matter the most. Our results suggest that network connections can play a stabilizing role during a financial crisis by easing the flow of capital to constrained firms.

Babina, Tania; García, Diego; Tate, Geoffrey. Friends During Hard Times: Evidence from the Great Depression. Journal of Financial & Quantitative Analysis. Sep2024, Vol. 59 Issue 6, p2647-2694.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2839049

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Finn Murphy: Rocky mountain high: a tale of boom and bust in the new wild west

Erik William Jeffries — Sat, 20 Jul 2024 02:21:16 +0000

Finn Murphy: Rocky mountain high: a tale of boom and bust in the new wild west Erik William J… Fri, 07/19/2024 - 20:21

Finance Wobbekind, Richard. Finn Murphy: Rocky mountain high: a tale of boom and bust in the new wild west: W. W. Norton, 2023. Business Economics. Jul2024, Vol. 59 Issue 3, p200-202.

Finn Murphy's book, "Rocky Mountain High: A Tale of Boom and Bust in the New Wild West," provides an engaging and insightful look into the world of business and life in Colorado's hemp industry. The book explores the legalization of industrial hemp in 2018 and the subsequent influx of farmers and entrepreneurs into the market. Murphy, a serial entrepreneur, shares his experiences and lessons learned as he navigates the challenges of growing and processing hemp. The book offers valuable insights into market dynamics, regulatory issues, and the human side of business.

https://link.springer.com/article/10.1057/s11369-024-00356-4

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Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression.

Erik William Jeffries — Sun, 19 Nov 2023 18:27:19 +0000

Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression. Erik William J… Sun, 11/19/2023 - 11:27

Babina, Tania; Bernstein, Asaf; Mezzanotti, Filippo. Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression. Review of Financial Studies. Nov2023, Vol. 36 Issue 11, p4271-4317. We examine innovation following the Great Depression using data on a century's worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.

https://academic.oup.com/rfs/article-abstract/36/11/4271/7100360?redirectedFrom=fulltext

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Human Capital Investment after the Storm.

Erik William Jeffries — Wed, 19 Jul 2023 17:31:37 +0000

Human Capital Investment after the Storm. Erik William J… Wed, 07/19/2023 - 11:31

Finance Gallagher, Emily A; Billings, Stephen B; Ricketts, Lowell R. Human Capital Investment after the Storm. Review of Financial Studies. Jul2023, Vol. 36 Issue 7, p2651-2684. How does household exposure to a natural disaster affect higher education investments? Using variation in flooding from Hurricane Harvey (2017), we find that college-aged adults from flooded blocks in Houston are 7% less likely than counterparts to have student loans after Harvey, with larger effects in areas with more potential first-generation students. We find a similar relative decline in enrollment at more exposed Texas universities and colleges and a shift toward majors with higher expected earnings. Our results highlight a decrease in the quantity but an increase in the intensity of investments in human capital after the storm.

https://academic.oup.com/rfs/article-abstract/36/7/2651/6971851?redirectedFrom=fulltext

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Speculation Sentiment

Justin Michael Forbis — Wed, 09 Nov 2022 23:34:20 +0000

Speculation Sentiment Justin Michael… Wed, 11/09/2022 - 16:34

I exploit the leveraged exchange-traded funds' (ETFs') primary market to measure aggregate, uninformed, gambling-like demand, that is, speculation sentiment. The leveraged ETFs' primary market is a novel setting that provides observable arbitrage activity attributed to correcting mispricing between ETFs' shares and their underlying assets. The arbitrage activity proxies for the magnitude and direction of speculative demand shocks and I use them to form the Speculation Sentiment Index. The measure negatively relates to contemporaneous market returns (e.g., it is bullish in down markets) and negatively predicts returns. The results are consistent with speculation sentiment causing market-wide price distortions that later reverse.

Davies, Shaun William. Speculation Sentiment. Journal of Financial & Quantitative Analysis. Nov2022, Vol. 57 Issue 7, p2485-2515.

https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/speculation-sentiment/846E44374D60D2760DFE5CE4B291F4EA

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Finance Publications

Specialization and performance in private equity: Evidence from the hotel industry.

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Broken promises, competition, and capital allocation in the mutual fund industry

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Specialization and performance in private equity: Evidence from the hotel industry

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Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression.

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