We study the welfare effects of the transition of online debt crowdfunding from the older “peer-to-peer” model to the “marketplace” model, where the crowdfunding platform sells diversified loan portfolios to investors. We...
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...
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...
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...
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...
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...
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...
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...
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...
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...
The success of a capitalist economy rests upon the ability of finance to sustain potentially infinite growth, based on funding today the output of tomorrow. Finance, however, needs rules. The aim of the law and finance scholarship...
We develop a search model of block trades that values the illiquidity of controlling stakes. The model considers several dimensions of illiquidity. First, following a liquidity shock, the controlling blockholder is forced to sell,...