Pearson Prizes for the Best Papers in Financial Management

Every two years, Financial Management’s Editors, Associate Editors, and Advisory Editors choose the best papers from all of the journal articles published during the past two years through a double ranking procedure. Thanks to the generous support of Pearson, the winner is awarded a cash prize of $7,500 and the runner-up paper is awarded a cash prize of $2,500.

Congratulations to the 2016 award winners. 

First Place

How Do Underwriters Select Peers When Valuing IPOs? (Volume #43, Winter 2014)
Stefano Paleari, Università Degli Studi di Bergamo; Andrea Signori, Università Cattolica del Sacro Cuore; Silvio Vismara, Università Degli Studi di Bergamo

Valuing initial public offerings (IPOs) using multiples allows underwriters discretion when selecting comparable firms. We find that they systematically exclude candidate comparable firms that make a given IPO appear overvalued. On average, comparable firms published in official prospectuses have 13%-38% higher valuation multiples than those obtained from matching algorithms or selected by sell-side analysts, including the same underwriter's analyst after the IPO. Even if IPOs are priced at a discount as compared to peers selected by the underwriters, they are still at a premium with regard to alternatively selected peers. Greater bias in the underwriter's selection of peers leads to poorer long run performance.

Second Place

Crises, Liquidity Shocks, and Fire Sales at Commercial Banks (Volume #43, Winter 2014)
Nicole Boyson, Northeastern University; Jean Helwege, University of California Riverside; Jan Jindra, US Securities and Exchange Commission

If liquidity shortages cause financial crises, a lender of last resort can provide funds to banks facing potential fire sales. However, if funding problems primarily occur at banks with existing solvency problems, then government liquidity programs may not spur bank lending. We find that commercial bank funding does not typically dry up in a crisis, not even during the subprime crisis. Rather, weak banks are more likely to borrow less. Furthermore, banks rely more on deposits and newly issued equity than fire sales. When they do sell assets, they cherry pick assets in order to alleviate pressure from capital regulations. 

Manuscripts published in Financial Management between Autumn 2014 and Summer 2016 were eligible for the first place and the second place best paper prizes.