The Brattle Group Prizes are awarded annually for outstanding academic papers in the field of corporate finance. They are chosen by the associate editors of The Journal of Finance from papers published in The Journal during the prior year. The Prizes are awarded by a member of The Brattle Group at the American Finance Association's annual meeting each January. They are funded through a grant from The Brattle Group in the amounts of $25,000 for first prize and $10,000 for distinguished papers.
Administration of The Brattle Group Prizes is the responsibility of the editor of The Journal of Finance and is carried out in conjunction with the selection of The Smith-Breeden Prizes. The papers receiving the most votes for each award receive the prizes; however, a paper may not win both awards.
The Brattle Group supports this yearly award in an effort to recognize academic achievement in offering robust analysis and debate on compelling issues facing the corporate finance community.
For copies of these papers, please visit The Journal of Finance website.
For more information on the American Finance Association, please visit the AFA website.
First Prize Paper: Johannes Stroebel
“Asymmetric Information about Collateral Values,” The Journal of Finance, June 2016.
I empirically analyze credit market outcomes when competing lenders are differentially informed about the expected return from making a loan. I study the residential mortgage market, where property developers often cooperate with vertically integrated mortgage lenders to offer financing to buyers of new homes. I show that these integrated lenders have superior information about the construction quality of individual homes and exploit this information to lend against higher quality collateral, decreasing foreclosures by up to 40%. To compensate for this adverse selection on collateral quality, nonintegrated lenders charge higher interest rates when competing against a better-informed integrated lender.
Distinguished Paper: Jean-Noël Barrot
"Trade Credit and Industry Dynamics: Evidence from Trucking Firms,” The Journal of Finance, October 2016.
Long payment terms are a strong impediment to the entry and survival of liquidity-constrained firms. To test this idea and its implications, I consider the effect of a reform restricting the trade credit supply of French trucking firms. In a difference-in-differences setting, I find that trucking firms' corporate default probability decreases by 25% following the restriction. The effect is persistent, concentrated among liquidity-constrained firms, and not offset by a decrease in profits. The restriction also triggers an increase in the entry of small trucking firms.
Distinguished Paper: Brendan Daley and Brett Green
“An Information-Based Theory of Time-Varying Liquidity,” The Journal of Finance, April 2016.
We propose an information-based theory to explain time variation in liquidity and link it to a variety of patterns in asset markets. In “normal times,” the market is fully liquid and gains from trade are realized immediately. However, the equilibrium also involves periods during which liquidity “dries up,” which leads to endogenous liquidation costs. Traders correctly anticipate such costs, which reduces their willingness to pay. This foresight leads to a novel feedback effect between prices and market liquidity, which are jointly determined in equilibrium. The model also predicts that contagious sell-offs can occur after sufficiently bad news.
First Prize Paper: Shai Bernstein
"Does Going Public Affect Innovation?" The Journal of Finance, August 2015.
This paper investigates the effects of going public on innovation by comparing the innovation activity of firms that go public with firms that withdraw their initial public offering (IPO) filing and remain private. NASDAQ fluctuations during the book-building phase are used as an instrument for IPO completion. Using patent-based metrics, I find that the quality of internal innovation declines following the IPO, and firms experience both an exodus of skilled inventors and a decline in the productivity of the remaining inventors. However, public firms attract new human capital and acquire external innovation. The analysis reveals that going public changes firms' strategies in pursuing innovation.
Distinguished Paper: Ulf Axelson and Philip Bond
"Wall Street Occupations," The Journal of Finance, October 2015.
Many finance jobs entail the risk of large losses, and hard-to-monitor effort. We analyze the equilibrium consequences of these features in a model with optimal dynamic contracting. We show that finance jobs feature high compensation, up-or-out promotion, and long work hours, and are more attractive than other jobs. Moral hazard problems are exacerbated in booms, even though pay increases. Employees whose talent would be more valuable elsewhere can be lured into finance jobs, while the most talented employees might be unable to land these jobs because they are “too hard to manage.”
Distinguished Paper: Robin Greenwood, Samuel G. Hanson, and Jeremy C. Stein
"A Comparative-Advantage Approach to Government Debt Maturity," The Journal of Finance, August 2015.
We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short-term securities. In a setting where the government is the only issuer of such riskless paper, it trades off the monetary premium associated with short-term debt against the refinancing risk implied by the need to roll over its debt more often. We extend the model to allow private financial intermediaries to compete with the government in the provision of short-term money-like claims. We argue that, if there are negative externalities associated with private money creation, the government should tilt its issuance more toward short maturities, thereby partially crowding out the private sector's use of short-term debt.
First Prize Paper: Douglas W. Diamond and Zhiguo He
"A Theory of Debt Maturity: The Long and Short of Debt Overhang," The Journal of Finance, April 2014.
Debt maturity influences debt overhang, the reduced incentive for highly levered borrowers to make real investments because some value accrues to debt. Reducing maturity can increase or decrease overhang even when shorter term debt's value depends less on firm value. Future overhang is more volatile for shorter term debt, making future investment incentives volatile and influencing immediate investment incentives. With immediate investment, shorter term debt typically imposes lower overhang; longer term debt can impose less if asset volatility is higher in bad times. For future investments, reduced correlation between assets-in-place and investment opportunities increases the shorter term debt overhang.
Distinguished Paper: Ulf Axelson, Tim Jenkinson, Per Stromberg, and Michael S. Weisbach
"Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts," The Journal of Finance, December 2013.
Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, international sample of buyouts from 1980 to 2008, we find that buyout leverage is unrelated to the cross-sectional factors, suggested by traditional capital structure theories, that drive public firm leverage. Instead, variation in economy-wide credit conditions is the main determinant of leverage in buyouts. Higher deal leverage is associated with higher transaction prices and lower buyout fund returns, suggesting that acquirers overpay when access to credit is easier.
Distinguished Paper: Ricardo J. Caballero and Alp Simsek
"Fire Sales in a Model of Complexity," The Journal of Finance, December 2013.
We present a model of financial crises that stem from endogenous complexity. We conceptualize complexity as banks' uncertainty about the financial network of cross exposures. As conditions deteriorate, cross exposures generate the possibility of a domino effect of bankruptcies. As this happens, banks face an increasingly complex environment since they need to understand a greater fraction of the financial network to assess their own financial health. Complexity dramatically amplifies banks' perceived counterparty risk, and makes relatively healthy banks reluctant to buy risky assets. The model also features a novel complexity externality.
First Prize Paper: Francisco Perez-Gonzalez and Hayong Yun
"Risk Management and Firm Value: Evidence from Weather Derivatives,” The Journal of Finance, October 2013.
Distinguished Paper: Maxim Mironov
"Taxes, Theft, and Firm Performance," The Journal of Finance, August 2013.
Distinguished Paper: Markus K. Brunnermeier and Martin Oehmke
“The Maturity Rat Race,” The Journal of Finance, April 2013.
First Prize Paper: Marianne Bertrand and Adair Morse
"Information Disclosure, Cognitive Biases, and Payday Borrowing,” The Journal of Finance, December 2011.
First Prize Paper: Philipp Schnabl
“The International Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market,” The Journal of Finance, June 2012.
Distinguished Paper: Vicente Cunat, Mireia Gine, and Maria Guadalupe
"The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value," The Journal of Finance, October 2012.
First Prize Paper: Efraim Benmelech and Nittai K. Bergman
"Bankruptcy and the Collateral Channel," The Journal of Finance, April 2011.
Distinguished Paper: Arthur Korteweg
"The Net Benefits to Leverage," The Journal of Finance, December 2010.
Distinguished Paper: Andrew Hertzberg, José M. Liberti and Daniel Paravisini
"Public Information and Coordination: Evidence from a Credit Registry Expansion," The Journal of Finance, April 2011.
First Prize Paper: Andrew Hertzberg, José M. Liberti, and Daniel Paravisini
"Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation," The Journal of Finance, June 2010.
Distinguished Paper: Thorsten Beck, Ross Levine, and Alexey Levkov
"Big Bad Banks? the Winners and Losers from Bank Deregulation in the United States," The Journal of Finance, October 2010.
Distinguished Paper: José M. Liberti and Atif R. Mian
"Collateral Spread and Financial Development," The Journal of Finance, February 2010.
First Prize Paper: Ulf Axelson, Per Strömberg, and Michael S. Weisbach
“Why Are Buyouts Levered? The Financial Structure of Private Equity Funds,” The Journal of Finance, August 2009.
Distinguished Paper: Paul Oyer
“The Making of an Investment Banker: Stock Market Shocks, Career Choice, and Lifetime Income,” The Journal of Finance, December 2008.
Distinguished Paper: Mark T. Leary
“Bank Loan Supply, Lender Choice, and Corporate Capital Structure,” The Journal of Finance, June 2009.
First Prize Paper: Heitor Almeida and Thomas Philippon
“The Risk-Adjusted Cost of Financial Distress,” The Journal of Finance, December 2007.
Distinguished Paper: Michael L. Lemmon, Michael R. Roberts, and Jaime F. Zender
“Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure,” The Journal of Finance, August 2008.
Distinguished Paper: Daniel Paravisini
“Local Bank Financial Constraints and Firm Access to External Finance,” The Journal of Finance, October 2008.
First Prize Paper: Ilya A. Strebulaev
“Do Tests of Capital Structure Theory Mean What They Say?” The Journal of Finance, August 2007.
Distinguished Paper: Christopher A. Hennessy and Toni M. Whited
“How Costly Is External Financing? Evidence from a Structural Estimation,” The Journal of Finance, August 2007.
Distinguished Paper: Amir Sufi
“Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans,” The Journal of Finance, April 2007.
First Prize Paper: Joshua D. Rauh
"Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans," The Journal of Finance, February 2006.
Distinguished Paper: Aydogan Alti
"How Persistent is the Impact of Market Timing on Capital Structure?" The Journal of Finance, August 2006.
Distinguished Paper: Mark T. Leary and Michael R. Roberts
"Do Firms Rebalance Their Capital Structures?" The Journal of Finance, December 2006.
First Prize Paper: Christopher A. Hennessy and Toni M. Whited
"Debt Dynamics," The Journal of Finance, June 2005.
Distinguished Paper: Marianne P. Bitler, Tobias J. Moskowitz, and Annette Vissing-Jorgensen
"Testing Agency Theory with Entrepreneur Effort and Wealth," The Journal of Finance, April 2005.
First Prize Paper: Belen Villalonga
"Diversification Discount or Premium? New Evidence from the Business Information Tracking Series," The Journal of Finance, April 2004.
Distinguished Paper: Christopher A. Hennessy
"Tobin's Q, Debt Overhang, and Investment ," The Journal of Finance, August 2004.
First Prize Paper: Antoinette Schoar
"Effects of Corporate Diversification on Productivity," The Journal of Finance, December 2002.
Distinguished Paper: Aydogan Alti
"How Sensitive is Investment to Cash Flow When Financing is Frictionless?," The Journal of Finance, April 2003.
First Prize Paper: Malcom Baker & Jeffrey Wurgler
"Market Timing and Capital Structure," The Journal of Finance, February 2002.
Distinguished Paper: Anil K. Kashyap, Raghuram Rajan, & Jeremy C. Stein
"Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking," The Journal of Finance, February 2002.
First Prize Paper: Per Stromberg
"Conflicts of Interest and Market Liquidity in Bankruptcy Auctions: Theory and Tests," The Journal of Finance, December 2001.
Distinguished Paper: Douglas W. Diamond & Raghuram G. Rajan
"A Theory of Bank Capital," The Journal of Finance, December 2001.
First Prize Paper: John R. Graham
"How Big are the Tax Benefits of Debt?" The Journal of Finance, October 2000.
Distinguished Paper: Raghuram Rajan, Henri Servaes, & Luigi Zingales
"The Cost of Diversity: The Diversification Discount and Inefficient Investment," The Journal of Finance, February 2000.
First Prize Paper: Clifford G. Holderness, Randall S. Kroszner, & Dennis P. Sheehan
"Were the Good Old Days That Good? Changes in Managerial Stock Ownership Since the Great Depression," The Journal of Finance, April 1999.
Distinguished Paper: Paper Rafael La Porta, Florencio Lopez-de-Silanes, & Andrei Shleifer
"Corporate Ownership Around the World," The Journal of Finance, April 1999.