Conference Agenda

This paper investigates how consumers and investors react to the standardized disclosure of data privacy practices. Since December 2020, Apple has required all apps to disclose their data collection practices by filling out privacy “nutrition” labels that are standardized and easy to read. We web-scrape these privacy labels and first document several stylized facts regarding the supply of privacy. Second, augmenting privacy labels with weekly app downloads and revenues, we examine how this disclosure affects consumer behavior. Exploiting the staggered release of privacy labels and using the nonexposed Android version of each app to construct the control group, we find that after privacy label release, an average iOS app experiences a 14% (15%) drop in weekly downloads (revenue) when compared to its Android counterpart. The effect is stronger for more privacy-invasive and substitutable apps. Moreover, we observe negative stock market reactions, especially among firms that harvest more data, corroborating the adverse impact on product markets. Our findings highlight data as a key asset for firms in the digital era.

We investigate how excess commitment to R&D activities impacts innovation outcomes and consumer welfare. Using project-level data on clinical trials by pharmaceutical firms, we document that trials which faced unanticipated delays in the previous trial stage, relative to initial firm expectations or induced by plausibly-exogenous trial site congestion, are significantly less likely to be subsequently suspended. These effects are amplified when the firm’s CEO has a greater wealth exposure to stock price changes and is personally responsible for the project initiation. Consumers may, in some ways, benefit from firms’ excess commitment in new drug development. Marginally-launched drugs because of commitment distortions are not significantly associated with more adverse events, but are significantly more likely to target diseases with no or only few existing medications in the marketplace (orphan drugs).

Capital ages and must eventually be replaced. We propose a theory of financing in which firms finance new capital with debt and optimally deleverage to free up debt capacity as their capital ages, thereby generating debt cycles. Concurrently, firms shorten the maturity of their debt to match the remaining life of their capital, generating maturity cycles. We provide time series and cross-sectional evidence that strongly supports these predictions and highlights the key roles of capital age and asset life for both debt dynamics and debt maturity choices.