Liquidity
Working Paper
Shareholder Illiquidity and Firm Behavior: Financial and Real Effects of the Personal Wealth Tax in Private Firms
We examine how negative liquidity shocks to households propagate to firms. We show that higher taxes on the home of private firms’ controlling shareholders are associated with higher dividend and salary payments from firms to shareholders and...Read more
The New Mechanisms of Market Inefficiency
Mechanisms of market inefficiency are some of the most important and least understood institutions in financial markets today. A growing body of empirical work reveals a strong and persistent demand for “safe assets,” financial instruments that...Read more
Costs and Benefits of Financial Conglomerate Affiliation: Evidence from Hedge Funds
This paper explores how affiliation to financial conglomerates affects asset managers’ access to capital, trading behavior, and performance. Focusing on a sample of hedge funds, we find that financial-conglomerate-affiliated hedge funds (FCAHFs)...Read more
Activism, Strategic Trading, and Liquidity
We analyze dynamic trading by an activist investor who can expend costly effort to affect firm value. We obtain the equilibrium in closed form for a general activism technology, including both binary and continuous outcomes. Variation in...Read more
The Dark Side of Liquidity Creation: Leverage and Systemic Risk
We consider a model in which the threat of bank liquidations by creditors as well as equity-based compensation incentives both discipline bankers, but with different consequences. Greater use of equity leads to lower ex ante bank liquidity,...Read more
Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement
This paper examines the economic effects of changes in securities regulation. We analyze two key directives in the European Union (EU) that tightened market abuse and transparency regulation. All EU member states were required to adopt these two...Read more
Liquidity and Governance
Is greater trading liquidity good or bad for corporate governance? We address this question both theoretically and empirically. We solve a model consisting of an optimal IPO followed by a dynamic Kyle market in which the large investor?s private...Read more
Mandatory IFRS Reporting and Changes in Enforcement
In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood....Read more
The Twilight Zone: OTC Regulatory Regimes and Market Quality
We analyze a comprehensive sample of more than 10,000 U.S. stocks in the OTC market. As little is known about this market, we first characterize OTC firms by trading venue and provide evidence on survival, success, frequency of venue changes,...Read more
Dispersed Ownership: The Theories, the Evidence, and the Enduring Tension Between 'Lumpers' and 'Splitters'
From a global perspective, the single most noticeable fact about corporate governance is the radical dichotomy between dispersed ownership and concentrated ownerships systems, with the latter being much in the majority. Several prominent...Read more
