The article uses experiential learning theory to magnify the importance of learning within the process of entrepreneurship. Previous research details the contributions of prior knowledge, creativity, and cognitive mechanisms to the process of opportunity identification and exploitation; however, the literature is devoid of work that directly addresses learning. The extant research assumes learning is occurring but does not directly address the importance of learning to the process. To fully understand the nature of the entrepreneurial process, researchers must take into account how individuals learn and how different modes of learning influence opportunity identification and exploitation. This article makes connections between knowledge, cognition, and creativity to develop the concept of learning asymmetries and illustrates how a greater appreciation for the differences in individual learning will fortify entrepreneurship research.

Many studies use the book value of debt as a proxy for its market value because most corporate debt does not trade. I call this practice the book value of debt (BVD) approximation, and it appears to be justified by the observation that the average market value of debt is close to its book value. Many corporate bonds, however, trade at values significantly different from their book values, and consequently the BVD approximation can create important biases. I compare the accuracy of the BVD approximation to Merton's option pricing (OPT) model of corporate debt valuation, and find consistent evidence that the Merton model provides more accurate estimates. I also show that this model is an easily estimated alternative to the BVD approximation. In short, the BVD approximation not only creates significant biases, but it is also an unnecessary simplification.

This paper views the standard production function in macroeconomics as a reduced form and derives its properties from microfoundations. The shape of this production function is governed by the distribution of ideas. If that distribution is Pareto, then two results obtain: the global production function is Cobb-Douglas, and technical change in the long run is labor-augmenting. Kortum showed that Pareto distributions are necessary if search-based idea models are to exhibit steady-state growth. Here we show that this same assumption delivers the additional results about the shape of the production function and the direction of technical change

Previous studies ignore the fact that employee stock options are warrants because these options have been an insignificant component of firms’ capital structures. I show that this assumption is no longer correct. For example, for more than 36% of my sample firms, employee stock options represent a more significant claim on firm value than the firm’s debt and preferred stock combined. Moreover, in contrast to the suggestions of previous research, I show that employee stock options are a significant claim on firms throughout the economy, including larger firms, older firms, and firms in “Old Economy” industries. Finally, I show that the presumption in prior studies that employee stock options are not warrants causes a potential misunderstanding of the risk-shifting interests of securityholders and biases the analysis of capital structure issues.

The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage. I argue that the equilibrium degree of open-ending in an economy can be excessive from the point of view of investors. When funds compete for investors' dollars, they may engage in a counterproductive race towards the open-end form, even though this form leaves them ill-suited to undertaking certain types of arbitrage trades. One implication of the analysis is that, even absent short-sales constraints or other frictions, economically large mispricings can coexist with rational, competitive arbitrageurs who earn small excess returns.

Banks are linked through the interbank deposit market, participations like syndicated loans and deposit interest rate risk. The similarity in exposures carries the potential for systemic breakdowns. This potential is either strong or weak, depending on whether the linkages remain or vanish asymptotically. It is shown that the linearity of the bank portfolios in the exposures, in combination with a condition on the tails of the marginal distributions of these exposures, determines whether the potential for systemic risk is weak or strong. We show that if the exposures have marginal normal distributions the potential for systemic risk is weak, while if e.g. the Student distributions apply the potential is strong.

The aim of this paper is to explain why cross-sectional estimated migration correlations displayed in the academic and professional literature can be either not consistent, or inefficient, and to discuss alternative approaches. The analysis relies on a model with stochastic migration in which the parameters of interest, that are migration correlations, are precisely defined. The impossibility of estimating consistently the migration correlations from cross-sectional data only is emphasized. We explain how to handle with individual rating histories, how to weight appropriately the cross-sectional estimators and how to estimate efficiently the joint migration probabilities at longer horizons.

We investigated the antecedents of volunteer behavior within a hierarchical model of motivation and personality. In Study 1, we developed measures of altruism and volunteer orientation and combined them with three additional traits to predict a set of volunteer behaviors. In Studies 2 and 3, we added six functional motives for volunteering identified by Clary et al. (1998) to the model. Across the 3 studies, the traits of altruism, the need for activity, and the need for learning were consistent predictors of volunteer orientation. In Studies 2 and 3, the measure of volunteer orientation was a significant predictor of the functional motives and of volunteer behaviors. Furthermore, the motive to help others was positively related to volunteering behaviors, and the motive of self‐enhancement was negatively related to them. Overall, the results support the proposal that functional motives act like motivated reasons for acting and reside at the surface level in a hierarchical model of personality.

We examine the underinvestment rationale for corporate hedging and test the hypothesis that if firms hedge to reduce both their reliance on external funds and the volatility of internal cash flow, then their investment spending should be less sensitive to prehedged cash flow. Our results are consistent with this hypothesis and indicate that investment spending is less sensitive to cash flow for hedgers than for nonhedgers. We also find that among hedgers, investment spending is less sensitive to cash flow when the extent of hedging is higher. Our results are generally robust to five different measures of cash flow.