THE AMERICAN FINANCE ASSOCIATION

Founded in 1940
OFFICERS
President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KENNETH R. FRENCH, Dartmouth College
President-Elect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . JEREMY STEIN, Harvard University
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DARRELL DUFFIE, Stanford University
Executive Secretary and Treasurer . . . . . . . . . . . . . . . . . . DAVID H. PYLE, University of California, Berkeley
Editor of The Journal of Finance . . . . . . . . . . . . . . . . . . . . CAMPBELL R. HARVEY, Duke University

BOARD OF DIRECTORS
PETER BOLTON (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Columbia University
JOHN Y. CAMPBELL (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Harvard University
KENT DANIEL (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Northwestern University
JOHN GRAHAM (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duke University
RICHARD C. GREEN (2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carnegie Mellon University
MARK GRINBLATT (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UCLA
PETER DEMARZO (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stanford University
KENNETH SINGLETON (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . Stanford University
JIANG WANG (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Massachusetts Institute of Technology
LUIGI ZINGALES (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . University of Chicago

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COPYRIGHT 
C 2007 BY THE AMERICAN FINANCE ASSOCIATION
Vol. 62 April 2007 No. 2

Editor
CAMPBELL R. HARVEY
Duke University

Co-Editor
JOHN GRAHAM
Duke University

Associate Editors

ANAT R. ADMATI MICHAEL LEMMON

Stanford University University of Utah
ANDREW ANG FRANCIS LONGSTAFF
Columbia University University of California, Los Angeles
KERRY BACK ANDREW METRICK
Texas A&M University University of Pennsylvania
MALCOLM BAKER TERRANCE ODEAN
Harvard University University of California, Berkeley
JONATHAN BERK CHRISTINE PARLOUR
University of California, Berkeley University of California, Berkeley
HENDRIK BESSEMBINDER ĽUBOŠ PÁSTOR
University of Utah University of Chicago
MICHAEL W. BRANDT LASSE HEJE PEDERSEN
Duke University New York University
ALON BRAV MITCHELL A. PETERSEN
Duke University Northwestern University
MARKUS K. BRUNNERMEIER MANJU PURI
Princeton University Duke University
DAVID A. CHAPMAN ANTOINETTE SCHOAR
Boston College Massachusetts Institute of Technology
JENNIFER S. CONRAD DUANE J. SEPPI
University of North Carolina, Chapel Hill Carnegie Mellon University
FRANCESCA CORNELLI HENRI SERVAES
London Business School London Business School
KENT DANIEL ANIL SHIVDASANI
Northwestern University University of North Carolina
BERNARD DUMAS RICHARD STANTON
University of Lausanne University of California, Berkeley
PAUL A. GOMPERS LAURA T. STARKS
Harvard University University of Texas, Austin
MARK GRINBLATT SURESH M. SUNDARESAN
University of California at Los Angeles Columbia University
DAVID HIRSHLEIFER ANDREW WINTON
Ohio State University University of Minnesota
HARRISON HONG
Princeton University
Business Manager
NARASIMHAN JEGADEESH
Emory University DAVID H. PYLE
University of California, Berkeley
STEVEN KAPLAN
University of Chicago
G. ANDREW KAROLYI Editor’s Staff
Ohio State University WENDY WASHBURN
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Volume 62 CONTENTS for APRIL 2007 No. 2

ANNOUNCEMENT OF 2006 SMITH BREEDEN PRIZES AND

BRATTLE AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

ARTICLES

Fund Manager Use of Public Information: New Evidence

on Managerial Skills
MARCIN KACPERCZYK and AMIT SERU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485
Managerial Ability, Compensation, and the Closed-End Fund Discount
JONATHAN B. BERK and RICHARD STANTON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529
Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed
Securities Market
XAVIER GABAIX, ARVIND KRISHNAMURTHY, and OLIVIER VIGNERON . . . . . . . . . . 557
Banking Deregulation and Industry Structure: Evidence
from the French Banking Reforms of 1985
MARIANNE BERTRAND, ANTOINETTE SCHOAR, and DAVID THESMAR . . . . . . . . . . 597
Information Asymmetry and Financing Arrangements: Evidence
from Syndicated Loans
AMIR SUFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
Winners or Losers? The Effects of Banking Consolidation
on Corporate Borrowers
EMILIA BONACCORSI DI PATTI and GIORGIO GOBBI . . . . . . . . . . . . . . . . . . . . . . . . . 669
Growth Opportunities and the Choice of Leverage, Debt Maturity,
and Covenants
MATTHEW T. BILLETT, TAO-HSIEN DOLLY KING, and DAVID C. MAUER . . . . . . 697
Smart Institutions, Foolish Choices: The Limited Partner
Performance Puzzle
JOSH LERNER, ANTOINETTE SCHOAR, and WAN WONGSUNWAI . . . . . . . . . . . . . . . 731
Financial Synergies and the Optimal Scope of the Firm:
Implications for Mergers, Spinoffs, and Structured Finance
HAYNE E. LELAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765
A Theory of Takeovers and Disinvestment
BART M. LAMBRECHT and STEWART C. MYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809
How Are Firms Sold?
AUDRA L. BOONE and J. HAROLD MULHERIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847
On the Importance of Measuring Payout Yield: Implications
for Empirical Asset Pricing
JACOB BOUDOUKH, RONI MICHAELY, MATTHEW RICHARDSON,
and MICHAEL R. ROBERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877
Decoupling CEO Wealth and Firm Performance: The Case
of Acquiring CEOs
JARRAD HARFORD and KAI LI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917
Corporate Governance, Idiosyncratic Risk, and Information Flow
MIGUEL A. FERREIRA and PAUL A. LAUX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951

MISCELLANEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991
THE JOURNAL OF FINANCE • VOL. LXII, NO. 2 • APRIL 2007

SMITH-BREEDEN PRIZES FOR 2006

First Prize Paper
Leonid Kogan, Stephen A. Ross, Jiang Wang, and Mark M. Westerfield
The Price Impact and Survival of Irrational Traders
February 2006

Distinguished Papers
Mark Loewenstein and Gregory A. Willard
The Limits of Investor Behavior
February 2006

Gur Huberman and Wei Jiang

Offering versus Choice in 401(k) Plans: Equity Exposure and Number of Funds
April 2006

BRATTLE AWARDS FOR 2006

First Prize Paper
Joshua D. Rauh
Investment and Financing Constraints: Evidence from the Funding of Corporate
Pension Plans
February 2006

Distinguished Papers
Mark T. Leary and Michael R. Roberts
Do Firms Rebalance Their Capital Structures?
December 2005

Aydo an Alti
How Persistent Is the Impact of Market Timing on Capital Structure?
August 2006