Finance at Leeds

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Finance Faculty Research

Research in Top Journals
Excess Capacity, Marginal q, and Corporate Investment
Journal of Finance
David Ikenberry
Additional author: Gustavo Grullon
Jun. 2025, Vol. 80 Issue 3, p1533-1592
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Abstract: Theory posits that when managers anticipate excess capacity, average q becomes a biased estimator of marginal q as the potential for underutilizing new capital reduces the marginal benefit of investing. After correcting for this source of measurement error, the explanatory power of Tobin's q substantially improves in time鈥恠eries and cross鈥恠ectional regressions as well as in out鈥恛f鈥恠ample tests. These findings, together with a secular erosion in capacity utilization, help explain why corporate investment rates have been declining for decades despite average q increasing significantly. Our analysis indicates that economic rigidities have contributed to the persistent erosion in capacity utilization.

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

Journal of Financial Economics
Christophe Spaenjers
Additional author: Eva Steiner
Dec. 2024, Vol. 162, 103930

Abstract: 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.

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

Journal of Financial Economics
Simona Abis
Additional author: Anton Lines
Dec. 2024, Vol. 162, 103948

Abstract: 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.

Blood Money: Selling Plasma to Avoid High-Interest Loans

Review of Financial Studies
Emily A. Gallagher
Additional author: John M Dooley
Sep. 2024, Vol. 37 Issue 9, p2779-2816

Abstract: 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.

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