We use data on stock portfolios of Norwegian households to show that stock market wealth increases entrepreneurship by relaxing financial constraints. Our research design isolates idiosyncratic variation in household-level stock market returns. An increase in stock market wealth increases the propensity to start a firm, with the response concentrated in households with moderate levels of financial wealth, for whom a 20 percent increase in stock wealth increases the likelihood to start a firm by about 20\%, and in years when the aggregate stock market return in Norway is high. We develop a method to study the effect of wealth on firm outcomes that corrects for the bias introduced by selection into entrepreneurship. Higher wealth causally increases firm profitability, an indication that it relaxes would-be entrepreneurs' financial constraints. Consistent with this interpretation, the pass-through from stock wealth into equity in the new firm is one-for-one.

Off-exchange trades are often executed by referencing on-exchange prices. In equilibrium, such price referencing softens market makers' on-exchange competition and makes liquidity expensive for investors. Additionally, by equalizing on- and off-exchange prices, price referencing guarantees “best-execution” and makes investors indifferent where to trade. Market makers effectively obtain a license to fragment orders off exchange, raising their profits but reinforcing market-wide illiquidity. This inefficiency remains tenacious even if more market makers enter and if they are forced to compete off exchange, as in the SEC's proposed order-by-order auction. The model yields important implications for regulating various forms of off-exchange trading.

Traditionally, fund managers cast votes on behalf of investors whose capital they manage. Recently, this system has come under intense debate given the growing concentration of voting power among a few asset managers and disagreements over environmental and social issues. Major fund managers now offer their investors a choice: delegate their votes to the fund or cast votes themselves ("voting choice"). This paper develops a theory of delegation of voting rights and studies the implications of voting choice for investor welfare. If voting choice is offered because investors have heterogeneous preferences, then investors may retain their voting rights excessively, inefficiently prioritizing their private preferences over information. As a result, investors on aggregate are not always better off if voting choice is offered to them. In contrast, if voting choice is offered to aggregate investors' heterogeneous information, then voting choice is generally efficient, increasing investor welfare. However, if information collection is costly, voting choice may lead to coordination failure, resulting in less informed voting outcomes.

This paper investigates how shocks to expected cash flows influence CEO incentive compensation. Exploiting changes in compliance with environmental regulations as shocks to expected future cash flows, we find that adverse shocks typically prompt corporate boards to recalibrate CEO compensation to reduce risk-taking incentives. However, this pattern is not uniform. Financially distressed firms exhibit milder reductions in compensation convexity, with some even increasing it, suggesting a "gambling for resurrection" strategy. Moreover, the strength of corporate governance influences shareholders' capacity to align executive incentives with shareholder risk preferences following unanticipated changes in the stringency of environmental regulations.

Nondiscrimination regulations, administrative costs, and fairness considerations can constrain the within-firm distribution of benefits. Using novel job-level data on nonwage benefits, we find a larger firm component of the variation in benefits than wages. We show that the presence of high-wage colleagues (or high-wage peers in other local firms) positively predicts workers’ benefits, controlling for job characteristics including own wages. Firms with more generous benefits attract and retain more high-wage workers, but also reduce their reliance on low-wage workers more than low-benefit peers. Our results suggest that benefits disproportionately matter for worker-firm matching and, hence, compensation

inequality.

We propose a new framework to explain the factor structure in the full cross section of Treasury bond returns. Our method unifies non-parametric curve estimation with cross-sectional factor modeling. We identify smoothness as a fundamental principle of the term structure of returns. Our approach implies investable factors, which correspond to the optimal spanning basis functions in decreasing order of smoothness. Our factors explain the slope and curvature shapes frequently encountered in PCA. In a comprehensive empirical study, we show that the first four factors explain the time-series variation and risk premia of the term structure of excess returns. Cash flows are covariances as the exposure of bonds to factors is fully explained by cash flow information. We identify a state-dependent complexity premium. The fourth factor, which captures complex shapes of the term structure premium, substantially reduces pricing errors and pays off during recessions.

We study the welfare implications of the rise of common ownership in the United States from 1994 to 2018. We build a general equilibrium model with a hedonic demand system in which firms compete in a network game of oligopoly. Firms are connected through two large networks: the first reflects ownership overlap, the second product market rivalry. In our model, common ownership of competing firms induces unilateral incentives to soften competition. The magnitude of the common ownership effect depends on how much the two networks overlap. We estimate our model for the universe of U.S. public corporations using a combination of firm financials, investor holdings, and text-based product similarity data. We perform counterfactual calculations to evaluate how the efficiency and the distributional impact of common ownership have evolved over time. According to our baseline estimates the welfare cost of common ownership, measured as the ratio of deadweight loss to total surplus, has increased nearly tenfold (from 0.3% to over 4%) between 1994 and 2018. Under alternative assumptions about governance, the deadweight loss ranges between 1.9% and 4.4% of total surplus in 2018. The rise of common ownership has also resulted in a significant reallocation of surplus from consumers to producers.

Combining transaction-level data with survey-based information from a large consumer panel, we show that on average consumers form excessively high expectations about future income relative to ex-post realizations after unexpected positive income shocks. This systematic bias in expectations leads to higher current consumption and debt accumulation as well as a higher likelihood of subsequent default on consumer debt. A consumption-saving model with defaultable unsecured debt and diagnostic Kalman filtering with consumers who over-extrapolate income shocks rationalizes these findings. The model predicts excessive leverage and higher subsequent default rates compared to a rational expectations benchmark. Over-extrapolation of income expectations can contribute to explaining state-dependent household debt cycles.

Women are less likely than men to start firms and female entrepreneurs are less

likely to succeed. This paper studies the effect of childbirth on women’s entrepreneurial activity. Drawing on rich administrative data from Canada and an

event study and instrumental variable design, I show that children have substantial

negative effects on both founding rates and start-up performance, accounting for

a large portion of the gender gap in entrepreneurship. The effects are permanent:

entrepreneurial outcomes never recover to their pre-birth levels. These results are

not fully explained by household specialization based on labor market advantage.

Childcare availability and belonging to a culture with progressive gender norms

reduce the adverse effect of childbirth on the entrepreneurship gap.

We show a significant loss in US Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. Although yield volatility explains most of the variation in Treasury market liquidity over time, when dealer balance sheet utilization reaches sufficiently high levels, liquidity is much worse than predicted by yield volatility alone. This is consistent with the existence of occasionally binding constraints on the intermediation capacity of bond markets.

An asset owner designs an asset-backed security and a signal about its value. After experiencing a liquidity shock and privately observing the signal, he sells the security to a monopolistic buyer. Within double-monotone securites, asset sale is uniquely optimal, which corresponds to the most informationally sensitive security. Debt is a constrained optimum under external regulatory liquidity requirements on securities. Thus, the “folk intuition” behind optimality of debt due to its low informational sensitivity holds only under additional restrictions on security or information design. Within monotone securities, a live-or-die security is optimal, whereas additional-tier-1 debt is optimal under the regulatory liquidity requirements.

We show that firms increase their pollution intensity as they become more financially distressed, particularly in locations with high environmental liability risks. We rationalize these facts using a dynamic model featuring endogenous default and clean and dirty assets. We assume that polluting practices can reduce short-term costs at the expense of exposing firms to persistent liability and regulatory risks. Thus, as firms become more financially distressed, they shift the composition of their assets toward the more polluting ones, akin to a risk-taking motive. Our counterfactuals highlight the limited environmental impact of heightened financing costs as firms intensify their pollution while scaling down.

I find noticeable bunching in venture capital (VC)-backed company valuations at $1 billion, the minimum threshold to be so-called unicorn companies. Exploiting the practice that reported valuations include authorized but unissued shares, VC-backed companies strategically authorize more shares for future employee compensation (e.g., stock options) to achieve unicorn status. Various stakeholders of VC-backed companies, especially employees who face uncertainties and information asymmetry, interpret unicorn status as a positive signal. Contrary to employees’ interpretation, however, inflating valuations to achieve unicorn status lowers the expected value of their stock options. Providing simple stock option payoff diagrams to employees can reduce information frictions.

We study the long-term effects of inflation surges on inflation expectations. German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today, after partialling out determinants of historical inflation and current inflation expectations. Our evidence points towards transmission of inflation experiences from parents to children and through collective memory. Differential historical inflation also modulates the updating of expectations to current inflation, the response to economic policies affecting inflation, and financial decisions. We obtain similar results for Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation.

We study the inflation implications for firms across the market power distribution

from an asset pricing perspective. Inflationary surprises are associated with

persistent declines in stock returns. We propose a new decomposition of the present

value identity of stock prices and show that investors expect nominal cashflows to

remain stagnant during periods of higher-than-expected inflation, a stagflationary

view of the world, on average, while a rising equity risk premium reduces stock

prices. Real yields do not increase in response to inflationary news, inconsistent

with a Taylor-rule type monetary policy-driven stock price response. Firms with a

large degree of market power are shielded from the negative returns following inflation

surprises, as market power firms are expected to generate a relative increase

in their nominal cashflows in response to inflation shocks. Changes in analysts’

firm-level earnings expectations around inflationary surprises confirm these results.

We study the performance of IRA pension plans from 2004 through 2018. We document novel evidence of large return heterogeneity across income groups in the US, and provide estimates of its impact on wealth inequality. High-income individuals substantially outperform low-income ones, and this return differential is almost three times as large in “tax-free” Roth IRAs. These returns cannot be matched by equity market returns, but are consistent with high-income individuals having exposure to private assets.

We examine an emerging phenomenon that talented employees leave successful entrepreneurial firms to join less mature start-ups. Using proprietary person-level data and private firm data, we find that the presence of these “serial venture employees” positively predicts their new employers’ future success in terms of exit likelihoods, size growth, venture capital financing, and innovation productivity. Such predictive power is more likely driven by a screening/matching channel rather than venture labor’s nurturing role. Our paper sheds light on an underexplored pattern of inter-firm labor flow, which provides a nonfinancial yet value-relevant signal about private firms for investors and stakeholders.

U.S. retail brokers route order flow to wholesalers based on their past performance. Brokers

face a strategic choice over how often to reallocate order flow, how aggressively to reward or

punish performance, and what history, across time or securities, to consider. This paper analyzes

how broker choices for allocating order flow shape competition among wholesalers. Our empirical

results are consistent with the theory that prospects for future order flow provide wholesalers

with strong incentives to offer price improvement and allow brokers to discipline the provision

of liquidity.

How efficient is the U.S. patent litigation system? We quantify the extent to which the litigation system shapes innovation using a novel dynamic model, in which heterogeneous firms innovate and face potential patent lawsuits. We show that the impact of a litigation reform depends on how heterogeneous firms endogenously select into lawsuits. Calibrating the model, we find that weakening plaintiff rights through fewer defendant injunctions increases firm innovation and output growth, improving social welfare by 3.32%. Raising plaintiff pleading requirements, which heightens barriers to filing lawsuits, likewise promotes innovation, boosts output growth, and enhances social welfare.

We study production responses to emission capping regulation on manufacturing firms. We find that firms lowered their pollution as they transitioned from self-generated to externally sourced electricity, shifted towards producing less coal-intensive products, and increased their abatement expenditures. Firms preserved profitability by increasing their production towards higher-margin products. However, firms in highly polluting industries produced fewer products, and in the aggregate, leading to lower product variety, higher markups, an altered firm-size distribution, and lower business formation. Our findings highlight both the mechanisms behind how mandated pollution reduction can be effective and its costs, suggesting a loss in agglomeration externalities.

This paper presents new evidence on the impact of bank branch expansion and credit access on human capital outcomes for children. Using a regression discontinuity design, we study a branch authorization policy by the Reserve Bank of India that encouraged banks to open branches in underbanked districts, where the population-to-branch ratio exceeded the national average. Bank presence, bank lending, and household borrowing increased. We find significant improvements in test scores: children in underbanked districts scored 0.16–0.22 SD higher on reading and math. We document three mechanisms. First, we find evidence for a demand-side channel where parents spent more on their children’s education and children spent more time on homework. Second, we document supply-side impacts in improvements in the quantity and quality of schools and teachers. Third, we find support for a labor market channel, with shifts away from agricultural employment and towards employment in manufacturing, while self-employed individuals expanded their businesses.

In March 2020, safe asset markets experienced surprising and unprecedented price crashes. We explain how strategic investor behavior can create such market fragility in a model with investors valuing safety, investors valuing liquidity, and constrained dealers. While safety investors and liquidity investors can interact symbiotically with offsetting trades in times of stress, liquidity investors’ strategic interaction harbors the potential for self-fulfilling fragility. When the market is fragile, standard flight-to-safety can have a destabilizing effect and trigger a dash-for-cash by liquidity investors. Well-designed policy interventions can reduce market fragility ex ante and restore orderly functioning ex post.

We explore the asset pricing implications of shocks that allow firms to extract more rents from consumers. These markup shocks directly impact the representative household's marginal utility and the firms' cash flow. Using firm-level data, we construct a measure of aggregate markup shocks and show that the price of markup risk is negative, that is, a positive markup shock is associated with high marginal utility states. Markup shocks generate differences in risk premia due to their heterogeneous impact on firms. Firms with larger exposures to markup shocks are less risky and have lower expected returns. We rationalize these findings in a general equilibrium model with markup shocks.

We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for labor earnings, Social Security benefits, and mortality and captures the salient time-series and cross-sectional properties of long-horizon asset class returns. Given the sheer magnitude of US retirement savings, we estimate that Americans could realize trillions of dollars in welfare gains by adopting the all-equity strategy.

Price discovery in financial markets guides the efficient allocation

of resources. Yet we argue that speculators uninformed about firms'

fundamentals can profit from distorting the allocative function of prices

by inflating stock prices. Such speculation can be profitable because high

valuations attract employees, business partners, and investors who create

value at targeted firms at the cost of diverting resources away from better

firms. The resulting resource misallocation is worst in "normal" (neither hot nor cold)

markets and when firms o¤er stakeholders performance compensation or equity.

Investors, such as VCs, can also profit from inflating firm valuations in private markets.

Using 150,000 actual trades, we examine competition among wholesalers, to which brokers route orders from their retail investors. We find that each broker's wholesaler execution prices have substantial dispersion and are persistent. However, most brokers do not adjust their routing even when they are sending more orders to higher-cost wholesalers. We also observe that the entry of a new wholesaler improves other wholesalers' execution quality. Finally, we present a stylized model that illustrates how brokers’ limited response to execution allows wholesalers to exercise their market power. Overall, our findings are inconsistent with perfect competition.

How to incentivize a manager to create value and be socially responsible? A manager can predict how his decisions will affect measures of social performance, and will therefore game an incentive system that relies on these measures. Still, we show that the compensation contract uses measures of social performance when the level of corporate social responsibility preferred by the board exceeds the one that maximizes the stock price. Relying on multiple measures based on different methodologies will generally mitigate inefficiencies due to gaming, i.e. harmonization of social performance measurement can backfire. This has normative implications for the regulation and harmonization of ESG measurement.

The rising frequency and severity of abnormally high temperatures pose significant threats to the health and productivity of exposed workers. This paper identifies a labor channel of corporate exposure to climate risk, measured using firms’ reliance on workers exposed to high temperatures while performing job duties. Consistent with the physical risk mechanism, unexpected extreme heat significantly reduces firm-level and plant-level labor productivity, making labor less efficient than capital as a production input. Firms adapt to these disruptions by shifting toward more capital-intensive production functions, i.e., higher capital-labor ratios. Firms further respond by investing more in robotics-related human capital and developing more automation-related technology. At the macro level, climate change impedes the growth of high-exposure industries in hot areas. My findings highlight that climate change accelerates automation in occupations and firms exposed to rising temperatures.

Using plant-level data from the Census Bureau, we show that unionized plants have lower and less effective incentives in addition to paying higher wages and benefits. Unionized plants do not exhibit the same positive associations between incentives and investment and growth found in non-unionized plants. This effect holds among both non-managerial and managerial employees, although it has a more pronounced influence on the former group. Consequently, unionized plants experience higher closure rates, reduced investment, and slower employment growth. We also find significant spillover effects within the firm: partially unionized firms also offer higher wages and maintain weaker incentives in their non-unionized plants than their industry peers. These effects are economically significant and are half of our estimated reduction in incentives in unionized plants. This pattern aligns with the hypothesis that incentives in nonunionized plants create disutility for the median worker. Spillovers reduce employment and efficiency and make firms less attractive as potential targets, thus reducing the market’s effectiveness in allocating corporate assets. By leveraging recent changes in state-level right-to-work laws, we provide causal evidence that states that adopt such laws experience a boost in employment and investment.

We document low-frequency shifts in the relationship between inflation and the convenience yield on US Treasury bonds. Treasury convenience comoves positively with inflation during the inflationary 1970s and 1980s, but negatively in the pre-WWII period and the pre-pandemic 2000s. We explain these changes with an interplay of the "money channel" and the "New Keynesian demand channel" by introducing Treasury convenience yield into a standard New Keynesian model. Exogenous shocks to inflation (such as cost-push shocks) raise nominal interest rates and, by extension, the opportunity cost of holding money and money-like assets, inducing a positive inflation-convenience relationship as observed in the 1970s and 1980s. In contrast, exogenous shocks to liquidity preferences (such as those originating from financial crises and panics) raise the perceived value of Treasuries, lowering consumption demand and inflation, and result in a negative inflation-convenience relationship as seen pre-WWII and post-2000. We argue that the experience of the past century is inconsistent with a direct effect of inflation depressing Treasury convenience.

We document that 20% of Compustat firms have above-median investment rates despite having below-median marginal product of capital (MPK), seemingly "misallocating" productive resources. These firms are typically younger and significantly more likely to experience a substantial upward jump in their sales and MPK in the following years. They account for a significant share of innovative activity and their investments predict future aggregate productivity in the economy, creating value in ways not captured by their MPK. We propose and estimate a simple endogenous firm growth model that captures the key features of the cross-section of firms and allows for counterfactual analysis. Hypothetical firm investment policies that ignore the potential for future jumps reduce MPK and investment dispersion but also lower aggregate productivity.

Partial Ownership (PO), which allows households to buy a fraction of a home and rent the remainder, is increasing in many countries with housing affordability challenges. We incorporate an existing for-profit PO contract into a life-cycle model to quantify its impact on homeownership, households’ welfare, and its implications for financial stability. We have the following results: 1) PO increases homeownership rates. 2) Willingness to pay increases with housing unaffordability and is highest among low-income and renting households. 3) PO increases aggregate debt as renters become partial owners but also reduces the average leverage ratios as indebted homeowners become partial owners.

This paper studies the economic importance of mobile applications (apps) as intangible assets. Using novel data, we construct a market-based app-value measure and show that it corresponds positively with apps' utility value, measured by future downloads. Firms' app values are associated with a significant reduction in firm-specific risk, especially when the apps collect user data. Following the California Consumer Privacy Act—a plausible exogenous shock to data-collecting ability—the relationship between app value and firm risk diminishes. Moreover, firms' app values predict substantial future growth and increased market power, and the growth is more pronounced when apps collect data.

The canonical mechanism for financial asset exchange is the limit-order book. In decentralized blockchain ledgers (DeFi), costs and delays in appending new blocks to the ledger render a limit-order book impractical. Instead, a “pricing curve” is specified (e.g., the "constant product pricing function") and implemented using smart contracts deployed to the ledger. We develop a framework to study the equilibrium properties of such markets. Our framework provides new insights into how informational frictions distort liquidity provision in DeFi markets.

The classic Q theory of investment is commonly interpreted to assert that marginal Q, synonymous to the marginal value of capital, is the sufficient statistic for investment. That is because Q-theory is purely demand-based in the sense that variations in investment are fully driven by those in the demand for investment.

This paper provides an exposition of how shocks to the supply of investment drive the joint dynamics of investment and Q. In absence of shocks to the marginal cost of invest- ment (i.e., the supply of investment), shocks to the marginal value of investment (i.e., the demand for investment) determine both equilibrium investment and Q, resulting in a con- ventionally expected monotonic relation along the constant upward-sloping investment supply curve. In presence of non-trivial shocks to the marginal cost of investment, how- ever, there is no longer a one-to-one relation between investment and Q. In essence, Q is to investment as price to quantity in any demand-supply system. This paper theoretically demonstrates that, in a general dynamic model of investment, shocks to the investment demand induce a positive comovement between investment and Q when the marginal cost of investment is monotonically increasing, while shocks to the investment supply induce a negative comovement of investment and Q when investment is sufficiently inelastic to supply shocks. The elasticity of investment to demand and supply shocks critically de- pends on their respective persistence. This paper shows with numerical simulations that the correlation between investment and marginal/average Q critically depends on the rela- tive volatility of and the persistence of supply shocks. A modest level of volatility of supply shocks is able to generate low or even negative correlations between investment and Q.

In summary, one should rethink from an equilibrium view the relation between invest- ment and Q, both of which are simultaneously determined by shocks to both investment demand and supply.

This paper studies how homeowners insurance markets respond to growing climate losses and how this impacts mortgage market dynamics. Using Florida as a case study, we show that traditional insurers are exiting high risk areas, and new lower quality insurers are entering and filling the gap. These new insurers service the riskiest areas, are less diversified, hold less capital, and 20 percent of them become insolvent. We trace their growth to a lax insurance regulatory environment. Yet, despite their low quality, these insurers secure high financial stability ratings, not from traditional rating agencies, but from emerging rating agencies. Importantly, these ratings are high enough to meet the minimum rating requirements set by government-sponsored enterprises (GSEs). We find that these new insurers would not meet GSE eligibility thresholds if subjected to traditional rating agencies’ methodologies. We then examine the implications of these dynamics for mortgage markets. We show that lenders respond to the decline in insurance quality by selling a large portion of exposed loans to the GSEs. We quantify the counterparty risk by examining the surge in serious delinquencies and foreclosure around the landfall of Hurricane Irma. Our results show that the GSEs bear a large share of insurance counterparty risk, which is driven by their mis-calibrated insurer eligibility requirements and lax insurance regulation.

Using IQ data from Danish military draft sessions, we document three results: First, employees in family firms have, on average, lower IQs than employees in nonfamily firms. This gap is higher for CEOs and for employees in high-skill job occupations. Second, the IQ gap is correlated with other well-established measures of talent. Third, a firm's average employee IQ is positively correlated with the quality of its management practices, which is significantly lower in family firms. We also document that family members at all levels have higher IQs than non-family members, but family leaders tend to hire employees with lower IQ relatively to non-family leaders. Our findings are consistent with the fact that the talent gap is rooted in family firms’ lower ability to identify and provide incentives for talented individuals.

As a result of the BoJ’s large-scale asset purchases, the consolidated Japanese government borrows mostly at the floating rate from households and invests in longer-duration risky assets to earn an extra 3% of GDP.We quantify the impact of Japan’s low-rate policies on its government and households. Because of the duration mismatch on the government balance sheet, the government’s fiscal space expands when real rates decline, allowing the government to keep its promises to older Japanese households. A typical younger Japanese household does not have enough duration in its portfolio to continue to finance its spending plan and will be worse off. Low-rate policies tax younger, poorer and less financially sophisticated households.

U.S. stocks' response to inflation surprises is, on average, robustly negative and shows pronounced time-series variability. Consistent with a view that stock prices respond to inflation surprises that affect the monetary policy stance, we document the largest stock market sensitivity during periods when inflation expectations and the output gap are running high. During these periods, firms with low net leverage, large market capitalization, high market beta, low book-to-market, and low markups are especially susceptible to inflation surprises.

We propose a structural model of constant gain learning about future earnings growth that incorporates preferences for the timing of cash flows. As implied by the model, a cross-sectional decomposition using survey forecasts shows that high price-earnings ratios are accounted for by both low expected returns and overly high expected earnings growth. The model quantitatively matches a number of asset pricing moments, as learning about growth interacts strongly with the preference for the timing of cash flows, and provides insights on the roles of risk premia and mispricing in the cross-section of stocks. The magnitudes and timing of the comovement between prices, earnings growth surprises, and anomaly returns are all consistent with a gradual learning process rather than expectations being highly sensitive to the most recent realization. Large earnings growth surprises do not immediately translate into large one-period returns, but instead are gradually reflected in future returns over time.

We use data from a major South African payment processor to study how digital payments mitigate asymmetric information challenges in small business "revenue-based financing" contracts, which tie repayment schedules to future revenue. Eight months post-financing, digital payments through the processor are 15% lower for takers than observably similar non-takers. We show this "gap" can be decomposed into three components: moral hazard from revenue hiding, adverse selection, and the causal effect of financing for takers. Two natural experiments suggest that takers shift more revenue off the platform when competition increases (moral hazard), and that financiers can increase repayment by waiting longer before extending offers (adverse selection). With estimates from both experiments, we bound the gap components, finding substantial adverse selection, but also positive short-run causal effects. Our results suggest digital payment platforms with "sticky" features can alleviate classic risk-sharing frictions by imposing hiding costs and limiting hidden information.

Financial data vendors intermediate the flow of information from firms to investors. I study frictions that arise in the context of this intermediation by focusing on one of the most prominent data vendors in the finance industry: Standard & Poor's ('S&P') Compustat database. Compustat provides subscribers with decades of 10-K and 10-Q data; however, it does not cover every public firm in every period. I show that a significant fraction of institutional investors do not invest in firms with missing data -- institutional ownership is over 40% below its unconditional mean for firms not covered in Compustat. A policy change instituted at S&P in the early 1990s provides a quasi-natural experiment to confirm a causal association between Compustat data coverage and institutional investor demand. In a battery of empirical tests, I then show that limited access to financial data is associated with lower informational efficiency of equity prices. This highlights the role that data vendors play in facilitating the flow of information within financial markets.

Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take managers at their word and show that EPS maximization provides a single unified explanation for a wide range of corporate policies involving leverage, share repurchases, cash holdings, and capital budgeting.

This paper investigates whether green investors can influence corporate greenhouse gas emissions through capital markets, and if so, whether they have a larger effect by the stock of polluting companies in order to limit their access to capital, or by acquiring polluters’ stock and engaging with management as owners. We focus on public pension funds, classifying them as green or nongreen based on which political party controlled the fund. To isolate the causal effects of green ownership, we use exogenous variation caused by state-level politics that shifted control of the funds, and portfolio rebalancing in response to returns from non-equity investment. Our main finding is that companies reduced their greenhouse gas emissions when stock ownership by green funds increased and did not alter their emissions when ownership by nongreen funds changed. Other evidence based on voting, shareholder proposals, and activist pension funds suggests that ownership mattered because of active engagement by green investors, and more through attempts to persuade than voting pressure. We do not find that companies with green investors were more likely to sell off their high-emission facilities (greenwashing). Overall, our findings suggest that (a) corporate managers respond to the environmental preferences of their investors; (b) divestment of polluting companies may lead to greater emissions; and (c) private markets may be able to partially address environmental challenges independent of government regulation.

I examine how population aging affects voter support for and the efficiency of public education provision. Analyzing a decade of school bond referendum data, I find that school districts with older populations are less likely to approve bond proposals to finance school investments. I leverage variations in historical fertility trends to separate the effect of aging-in-place from that of endogenous sorting. Comparing narrowly passed and failed referenda, I find that house prices do not appreciate after bond approvals in older-population districts, despite increased spending. These results align with generational political divisions over education investment but do not indicate inefficiency.

We study the valuation of state-issued tax-exempt municipal bonds and find that there are significant convenience premia in their prices. These premia parallel those identified in Treasury markets. We find evidence that these premia are tax related. Specifically, the premia are related to measures of tax and fiscal uncertainty, forecast flows into state municipal bond funds, and are directly linked to outmigration from high-tax to low-tax states and to other measures of tax aversion such as IRA and retirement plan contributions. These results suggest that investors are willing to pay a substantial premium to avoid

taxes.

We introduce a novel log-linear identity linking a company's market value to expected future markups, output growth, discount rates, and investments within a present-value framework. By distinguishing between realized and expected markups, we unveil five new empirical facts. (i) Expected markups account for one-third of the rise in aggregate firm values of U.S. public firms since 1980. (ii) The rise in aggregate expected markups is driven by a reallocation of market share towards high-expected-markup firms. Mergers have accelerated this trend with expected (but not realized) markups rising post merger. (iii) Expected markups are closely tied to fixed costs and investments, particularly in intangibles. (iv) There is a negative time-series relationship between expected markups and discount rates, but (v) there is a positive cross-sectional link to risk premia after accounting for other risk factors. These five facts can guide the development of macro-finance models.

Student loans with income-contingent repayment insure borrowers against income risk but can reduce their incentives to earn more. Using a change in Australia's income-contingent repayment schedule, I show that borrowers reduce their labor supply to lower their repayments. These responses are larger among borrowers with more hourly flexibility, a lower probability of repayment, and tighter liquidity constraints. I use these responses to estimate a dynamic model of labor supply with frictions that generate imperfect adjustment. My estimates imply that the labor supply responses to income-contingent repayment decrease the optimal amount of insurance but are too small to justify fixed repayment contracts. Moving from a fixed repayment contract to a constrained-optimal income-contingent loan increases welfare by the equivalent of a 1.3% increase in lifetime consumption at no additional fiscal cost.