Conference Agenda

We test whether differences in ownership structure influence race and gender diversity in corporate boards. We find that privately-owned, venture-backed companies appoint a lower proportion of minorities and women to their boards compared to publicly traded firms. After the George Floyd Social Justice Movements of 2020, the racial diversity gap in appointments widened significantly from 7 to 30 percentage points, as private firms responded less to social and media pressure to diversify. The lack of diversity in venture-capital (VC) backed private firms is persistent and remains following firms' IPO, leading to a diversity gap between VC- and non-VC-backed public firms. We show real effects of board diversity, as companies with Black directors are more likely to hire Black employees, an effect absent for Hispanic and female directors. Our study, which uses image recognition techniques combined with extensive manual review to build the first large database of board diversity in VC-backed private firms, highlights the influence of both venture capitalists and public shareholders on board composition and its implications on employee composition.

This paper examines the influence of private equity firm (GP) political contributions on public pension funds' investment decisions using micro-data on investments in private equity (PE) funds. Employing a regression discontinuity design comparing GPs donating to winning versus losing candidates in close U.S. state elections, I find that post-election pensions' tendency to invest are 10 times higher in GPs donating to winner assigned as or appoint their board member. Effects are pronounced for candidates seeking elections afterwards and weakest in states with high public corruption oversight. Connection-based PE funds underperform non-connected ones, partly attributed to abnormal management fees and lower subscription rates.

This paper examines the relation between firm performance and turnover for the directors of public companies over the last two decades. In the mid-2000s, firms with stock price performance in the lowest quartile of the sample exhibit a 15% greater likelihood of director turnover. By the late-2010s, this figure nearly doubles to 28%, a probability that is equivalent to the turnover-performance sensitivity (TPS) for CEOs. We document several factors that contribute to the increase in director TPS over time including trends towards independent board chairs and nominating committees. In addition, the increase in director TPS is most pronounced for firms with a lower local supply of prospective replacement directors and for firms with attentive institutional investors.

A firm's gross margin increases by 0.8 p.p. after forming a new direct board connection to a product market peer. Gross margin also rises by 0.4 p.p. after a connection is formed to a peer indirectly through a third intermediate firm. Further, using barcode-level data of 2.7 million products, we show that new board connections are related to higher consumer good prices and a greater tendency for market allocation. The effects are stronger when the newly connected peers share corporate customers or have similar business descriptions and hold when controlling for other inter-firm relationships.

This paper measures diversity, equity, and inclusion (DEI) using proprietary data on survey responses used to compile the Best Companies to Work For list. We identify 13 of the 58 questions as being related to DEI, and aggregate the responses to form our DEI measure. This variable has low correlation with gender and ethnic diversity in the boardroom, in senior management, and within the workforce, suggesting that DEI captures additional dimensions missing from traditional measures of demographic diversity. DEI is also unrelated to general workplace policies and practices, suggesting that DEI cannot be improved by generic initiatives. However, DEI is higher in small growth firms and firms with high financial strength. DEI is associated with higher future accounting performance across a range of measures, higher future earnings surprises, and higher valuation ratios, but demographic diversity is not. DEI perceptions among professional workers, such as R&D employees, are significantly correlated with the number and quality of patents. However, DEI exhibits no link with future stock returns.

For digital assets, is traditional corporate governance still ideal? We explore the governance of hundreds of prominent Decentralized Autonomous Organizations (DAOs), classifying 28 distinct characteristics related to aspects of governance such as token holder's privileges to bring improvement proposals, the voting process, consensus mechanisms, and security features. Our findings reveal that governance practices fostering broad participation or heightened security are linked with positive abnormal returns, while barriers to improvement proposal adoption correspond to negative returns. This outperformance is also evident in non-financial metrics like user growth and lack of security breaches. Further, evidence from a regression discontinuity design using close-call votes on governance proposals suggests these innovative governance features significantly change value. Overall, our research suggests the benefits of decentralized governance models surpass those that solely concentrate on traditional corporate concerns, such as reducing agency costs, in digital markets.

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 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.

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 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.

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.

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 study the transmission of monetary policy through bank securities portfolios for the United States using granular supervisory data on bank securities, hedging positions, and corporate credit. We find that banks that experienced larger market value losses on their securities during the monetary tightening cycle in 2022 extended relatively less credit to firms. Such a spillover effect was stronger for (i) available-for-sale securities, (ii) unhedged securities, and (iii) banks that have to include unrealized gains and losses on their available-for-sale securities in their regulatory capital. A structural model, disciplined by our cross-sectional regression estimates, shows that policy rate transmission is more powerful if banks are required to adjust their regulatory capital for unrealized value changes of securities.

This paper studies how tightening monetary policy transmits to the economy through the mortgage market and sheds new light on the distributional consequences at both individual and regional levels. We specifically examine the sharp increase in mortgage interest rates during 2022 and 2023. We find that almost all of the decline in mortgages compared to prior years was concentrated in loans that would have had a debt-to-income (DTI) ratio above underwriting thresholds. These effects are even more pronounced for minority and middle-income borrowers. Additionally, regions more affected by the thresholds exhibited greater reductions in mortgage originations, house prices, and consumption.

Financial technology has reshaped commercial banking. It has the potential to radically alter the transmission of monetary policy by lowering search costs and expanding banking markets. This paper studies the reaction of online banks to changes in federal fund rates. We find that these banks increase rates that they offer on deposits significantly more than traditional banks do. A 100 basis points increase in the federal fund rate leads to a 30 basis points larger in rates of online banks relative to traditional banks. Consistent with the rate movements, online bank deposits experience inflows, while traditional banks experience outflows during monetary tightening in 2022. Results are similar across banking markets of different competitiveness and demographics, but they vary with the stickiness of banking relationships. Our findings shed new light on the role of online banks in interest rate passthrough and the deposit channel of monetary policy.

We propose a theory of payments that highlights a conflict between the roles of medium of exchange and store of value. We posit that payments must involve the reciprocal transfer of a scarce reserve good, which holds value for other non-payment purposes. The theory demonstrates that agents make payments only when reserves are abundant enough and when the conflict is low. Otherwise, history-dependent equilibria arise in which an agent’s payment decision depends on the payment history of other agents within an equilibrium. The theory explains why payments frequently encounter delays and interruptions. Improving payment technologies may not reduce such fragility when reserves remain scarce and valuable for non-payment functions. The theory helps explain the evolution of money and payment systems, encompassing metallic payments before fiat money, modern bank payments, cross-border payments, and contemporary digital payment systems.

We examine the impact of digital payments on the transmission of monetary policy. Leveraging administrative data on Pix, a digital payment system introduced by the Central Bank of Brazil, we find that Pix adoption has diminished banks’ market power, making them more responsive to changes in policy rates. Subsequently, we estimate a dynamic banking model in which digital payment amplifies deposit elasticity through the household sector. Our counterfactual results reveal that digital payments amplify the monetary policy transmission by reducing banks’ market power – banks respond more to policy rate changes after Pix. We find that digital payments impact monetary transmission primarily through the deposit channel.

I study how financial technology reshapes competition among banks. I exploit quasi-random variation in exposure to the introduction of Brazil's Pix, an instant payment system, and show that instant payments increase deposit competition. Small bank deposits rise relative to large banks because Pix allows small banks to offer greater payment convenience to depositors. Since they become more competitive in the provision of payment services, small banks reduce deposit rates relative to large banks. Finally, I estimate a deposit demand model and find that depositors' welfare increases with Pix. These findings suggest that universally available payment systems can foster banking competition.