Working Papers

This paper considers dynamic moral hazard settings, in which the agent’s actions have consequences in the future. To maintain incentives, the optimal contract ties deferred compensation and termination to future performance. Some of the…

Performance appraisal is one of the cornerstones of management control systems. Although this topic has been the subject of considerable prior research, most of this work is based on a single observation per firm or performance appraisal…

This paper examines the optimal degree of centralization that can be achieved with respect to bailout policies when a central authority cannot supervise the entire banking system of the economy. Part of the banking system is supervised by a local…

Systematic risk is an important determinant of corporate capital structure. A one standard deviation increase in asset beta corresponds to a decrease in leverage of 13%, controlling for total asset volatility. This evidence is consistent with…

We examine a firm’s price-to-earnings (P/E) and price-to-book (P/B) ratios in a model of sequential capacity investments. Our analysis focuses on several key variables, including past and anticipated future investment growth, economic…

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset…

I study public liquidity provision in a liquidity-constrained economy in which government policy is decided by politicians subject to rent-seeking and electoral constraints. Public interventions are modeled as a choice between direct fiscal…

We evaluate the performance of private equity (PE) funds, using a variance decomposition model to separate skill from luck. We find a large amount of long-term persistence, and skilled PE firms outperform by 7% to 8% annually. But this…

This article discusses the role of GAAP accounting from an investor’s perspective.  For all its flaws, a historical-based system of accounting is vital to the investment community, and I believe moves toward fair value accounting should…

We examine the financial health and performance of reverse mergers (RMs) that became active on U.S. stock markets between 2001 and 2010, particularly those from China (around 85% of all foreign RMs). As a group, RMs are small, early-stage…

Over the last few decades, researchers have taken a thorough and critical look at corporate governance from various perspectives. For the most part, they have found that structural features of corporate governance have little or no relation to…

We empirically investigate the effect of uncertainty on corporate hiring. Using novel data from the labor market for MBA graduates, we show that uncertainty regarding how well job candidates fit with a firm’s industry hinders hiring, and that…

We answer the following question: At t = 1, an expert has (probabilistic) information about a random outcome X. In addition, the expert will obtain further information about X as time passes, up to some time t = T + 1 at which X will be publicly…

We use an extensive data set of bilateral exposures on credit default swap (CDS) to estimate the impact on collateral demand of new margin and clearing practices and regulations. We decompose collateral demand for both customers and dealers into…

We reexamine the classic yet static information asymmetry model of Myers and Majluf (1984) in a fully dynamic market. A firm has access to an investment project and can finance it by debt or equity. The market learns the quality of the firm over…

This paper studies a dynamic communication game in which the seller of an asset, whose credibility is unknown to the market, reports changes in the asset value during multiple periods before selling the asset. We characterize the strategy by…

This paper analyzes how the audience for internet news varies with the source of the referral, comparing the audience when users navigate directly to news outlets to that when users are referred by social media. On average, the audience referred…