A Theory of Fiscal Responsibility and Irresponsibility
We propose a political economy mechanism that explains the presence of fiscal regimes punctuated by crisis periods. Our model focuses on the interaction between successive deficit-biased governments subject to i.i.d. fiscal shocks. We show that the economy transitions between a fiscally responsible regime and a fiscally irresponsible regime, with transitions occurring during crises when fiscal needs are large. Under fiscal responsibility, governments limit their spending to avoid transitioning to fiscal irresponsibility.
Do Socially Responsible Firms Walk the Talk?
Several firms claim to be socially responsible. We confront these claims with the data using the most notable such proclamation in recent years, the August 2019 Statement on the Purpose of a Corporation by the Business Roundtable (BRT). The BRT is a large, deeply influential business group containing many of America’s largest firms; the 2019 Statement proclaimed that a corporation’s purpose is to deliver value to all stakeholders, rather than to solely maximize shareholder value.
Issues Revisited from Rumelt’s (1974) “Diversification, Strategy & Performance”
Performance expectations are revisited pertaining to particular corporate strategies that were highlighted by Rumelt (1974). In particular, suggestions regarding expectations about conglomerate enterprises, vertical integration, and mature- or declining-demand businesses are offered in light of additional information about research findings and observed industry phenomena that are at odds with information available when Rumelt's (1974) study of diversification was performed.
Delays in Banks' Loan Loss Provisioning and Economic Downturns: Evidence from the U.S. Housing Market
I study whether banks' loan loss provisioning contributes to economic downturns, by examining the U.S. housing market. Specifically, I examine the aggregate effects of banks' delayed loan loss recognition (DLR) on house prices during the Great Recession and the channels through which these potential effects arose. I construct ZIP-code-level exposure to banks' DLR before the crisis and compare high- and low-exposure ZIP codes during the crisis to examine the aggregate effects of banks' DLR on the housing market.
The Commitment Benefit of Consols in Government Debt Management
We consider optimal government debt maturity in a deterministic economy in which the government can issue any arbitrary debt maturity structure and in which bond prices are a function of the government's current and future primary surpluses. The government sequentially chooses policy, taking into account how current choices - which impacts future policy -- feed back into current bond prices. We show that issuing consols constitutes the unique stationary optimal debt portfolio, as it boosts government credibility to future policy and reduces the debtfinancing costs.
Reporting Regulation and Corporate Innovation
We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe’s regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate.
Principles of Strategy: A Practice-Based View
The SMR was pleased to conduct a set of launch conferences before its first published issue in 2020. One launch conference occurred at Columbia Business School in the summer of 2019 at which James Gorman, Chairman and CEO of Morgan Stanley served as the keynote speaker. An edited excerpt of part of his address appears below, in which he describes essential elements of his conception of strategy, or his principles of strategy. Kathryn Rudie Harrigan, Henry R.
Uneven Regulation and Economic Reallocation: Evidence from Transparency Regulation
We investigate the impact of uneven transparency regulation across countries and industries on the location of economic activity. Using two distinct sources of regulatory variation—the varying extent of financial-reporting requirements and the staggered introduction of electronic business registers in Europe—, we consistently document that direct exposure to transparency regulation is negatively associated with the focal industry’s economic activity in terms of inputs (e.g., employment) and outputs (e.g., production).
Bartik Instruments: An Applied Introduction
This article provides an applied introduction to Bartik instruments. The instruments attempt to reduce familiar endogeneity concerns in differential exposure designs (e.g., panel regressions with unit and time fixed effects). They isolate treatment variation due to the differential impact of common shocks on units with distinct pre-determined exposures. As a result, the instruments purge the treatment variation of possibly confounding factors varying across units over time.
Monetary Policy Transmission in Segmented Markets
We show that dealer market power impedes the pass-through of monetary policy in repo markets, which is an important first stage of monetary policy transmission. In the European repo market, most participants do not have access to trade on centralized exchanges. Rather, they rely on OTC intermediation by a small number of dealers that exhibit significant market power. As a result, the passthrough of the ECB's policy rate to repo markets is inefficient and unequal.
Overcoming Market Power in Online Video Platforms
The chapter proposes an ‘open video system’ to deal with digital dominance in the online streaming video sector. TV, in its third generation, is becoming online-based and, due to the fundamental technology and economics of the medium, controlled by a few global platforms. The extent is shown by market concentration numbers developed in the chapter. How to deal with this problem? Instead of following the breakup or public utility models, the chapter advocates the enablement of information intermediaries that would act on behalf of consumers.
Accounting for uncertainty: an application of Bayesian methods to accruals models
We provide an applied introduction to Bayesian estimation methods for empirical accounting research. To showcase the methods, we compare and contrast the estimation of accruals models via a Bayesian approach with the literature’s standard approach. The standard approach takes a given model of normal accruals for granted and neglects any uncertainty about the model and its parameters. By contrast, our Bayesian approach allows incorporating parameter and model uncertainty into the estimation of normal accruals.