RCFS Expands to 4 Issues

We are pleased to announce that the Review of Corporate Finance Studies has made the decision to begin publishing four issues per year, starting in 2021. RCFS has experienced a sustained influx of high quality submissions, allowing an increase in our annual number of published papers.

Forthcoming Paper

“Dividends versus Stock Repurchases and Long-Run Stock Returns under Heterogeneous Beliefs” by Onur Bayar, Thomas J. Chemmanur, and Mark H.  Liu

Paper Spotlight: Information Bias in the Proxy Advisory Market

Yan Xiong

Shichao Ma

Investors increasingly rely on proxy advisors such as ISS in deciding how to vote in corporate elections. In the paper “Information Bias in the Proxy Advisory Market,” Shichao Ma and Yan Xiong construct a theoretical model to examine the biases that can arise when the proxy advisor is a profit-maximizer. An intuitive finding is that a conflicted proxy advisor provides biased recommendations. More interestingly, if shareholders have either distorted preferences or distorted beliefs, even an unconflicted advisor finds it profit-maximizing to cater to shareholders, rather than provide the recommendation most consistent with maximizing firm value. The key is that shareholders’ willingness to pay for the recommendation depends on their own perception of the value of the recommendation, and the proxy advisor can raise the price of its services when shareholders find the recommendation to be more valuable. The equilibrium is sophisticated, as shareholders have an incentive to free-ride off each other to avoid paying for the service. Surprisingly, firm value can sometimes be greater when shareholders have intrinsic biases, compared to when shareholders want to maximize firm value. By skewing its recommendations to cater to shareholders’ beliefs and preferences, the proxy advisor can increase its price, which sometimes leads to more shareholders acquiring their own information. For example, if shareholders are a priori overly optimistic but also loss-averse, in equilibrium the information acquisition effect leads to a better electoral outcome for the firm and an enhancement of firm value.

Spotlight by Uday Rajan
Photos courtesy of Shichao Ma and Yan Xiong

3rd Future of Financial Information Conference

The Call for Papers for Stockholm Business School’s 3rd Future of Financial Information Conference is now available. The conference, which features a dual submission option with the Review of Asset Pricing Studies and the Review of Corporate Finance Studies, will take place May 19-21, 2021, both virtually and on campus. The RAPS sponsoring editor is Thierry Foucault and the RCFS sponsoring editor is Andrew Ellul. The submission deadline is December 22, 2020. For more details, please see the conference web site.

Call for Papers: 2021 RCFS Winter Conference

The 2021 RCFS Winter Conference is now accepting submissions. Please see the Call for Papers and the Call for Registered Reports on Discrimination, Disparities, and Diversity in Finance for more details. The conference, which features a dual submission option with RCFS, will take place virtually on February 13 and 14, 2021. The sponsoring editors are Andrew Ellul, Isil Erel, Camelia Kuhnen, and Uday Rajan. The submission deadline is December 1, 2020, for papers and December 21, 2020, for registered reports.

Camelia Kuhnen Joins the RCFS Team

Camelia Kuhnen begins her role as an editor of RCFS today. Camelia is a professor of finance and Sarah Graham Kenan distinguished scholar at UNC Kenan-Flagler and a faculty research associate at NBER. She is an expert in household finance, neuroeconomics, and corporate finance. She is an associate editor at the Journal of Finance, the Review of Financial Studies, and Management Science. Camelia previously served as president of the Society for Neuroeconomics and as an associate editor of RCFS. Please join us in welcoming her to the team.