Research articles for the 2019-10-19

Private Equity and Financial Fragility During the Crisis
Bernstein, Shai,Lerner, Josh,Mezzanotti, Filippo
Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.

Strategic Liquidity Provision in High Frequency Trading
Hayashi, Takaki,Nishide, Katsumasa
We construct a Kyle (1985) - type market model in which fast and slow traders are present. We will show with numerical calculations that a fast trader who has an advantage in trade frequency plays a role as a liquidity provider in the sense that he takes the opposite position against a slow trader if the difference in frequency is significant. Our theoretical results seem generally consistent with empirical results reported by previous studies.

Trademark and IPO Underpricing
Yang, Bin,Yuan, Tao
This paper studies the relationship between a firm̢۪s pre-IPO trademarks and its IPO under-pricing. Using 4,321 US IPOs during the period 1980-2016, we find that firms with a larger number of trademarks prior to the IPO date experience significantly less IPO under-pricing. We employ the 1996 Federal Trademark Dilution Act as a quasi-natural experiment and an instrumental variable approach to establish the causality. Our findings are in line with that trademarks reduce IPO under-pricing through signaling firm quality.