Estimating comovement measures for a large set of bilateral foreign exchange (FX) rates, I explore the relation between firm-level FX exposure and its time-varying diversifiability. For a sample of U.S. firms, the magnitude of FX exposure appears to increase during periods of low currency risk diversifiability. Additional results suggest that the introduction of the euro exacerbated the effect of diversifiability on developed market currency exposure. Moreover, the low diversifiability of emerging market currencies seems to have a stronger effect on FX exposure than the low diversifiability of developed market currencies.

Utilizing transaction-level financial data, we explore how household consumption responded to the onset of the COVID-19 pandemic. As case numbers grew and cities and states enacted shelter-in-place orders, Americans began to radically alter their typical spending across a number of major categories. In the first half of March 2020, individuals increased total spending by over 40% across a wide range of categories. This was followed by a decrease in overall spending of 25%–30% during the second half of March coinciding with the disease spreading, with only food delivery and grocery spending as major exceptions to the decline. Spending responded most strongly in states with active shelter-in-place orders, though individuals in all states had sizable responses. We find few differences across individuals with differing political beliefs, but households with children or low levels of liquidity saw the largest declines in spending during the latter part of March.

By analyzing the portfolio allocations of target date funds (TDFs), we document that the observed durations of TDF portfolios are inconsistent with the durations predicted by classical portfolio theory. We call this stylized fact the duration puzzle. We investigate to what extent several extensions of classical portfolio theory can explain the duration puzzle. More specifically, we consider the impact of human capital, inflation risk, and portfolio restrictions on the duration of the optimal portfolio. We find that it is difficult to explain the duration puzzle, especially for individuals aged between 35 and 65 years.

Theory suggests that government aid to banks may either reduce or increase systemic risk. We are the first to address this issue empirically, analyzing the Troubled Assets Relief Program (TARP). Analysis suggests that TARP significantly reduced contributions to systemic risk, particularly for larger and safer banks, and those in better local economies. This occurred primarily through a capital cushion channel that reduced market leverage by increasing the value of common equity. Results are robust to endogeneity and selection bias checks. Findings yield policy conclusions about whether to aid banks, the best targets for future assistance, and short-term versus long-term effects.

This paper advances the proposition that economics, as a discipline, gives rewards that favor the “hard” and disfavor the “soft.” Such bias leads economic research to ignore important topics and problems that are difficult to approach in a “hard” way—thereby resulting in “sins of omission.” This paper argues for reexamination of current institutions for publication and promotion in economics—as it also argues for greatly increased tolerance in norms for publication and promotion as one way of alleviating narrow methodological biases. (JEL A11, B40)

This article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

We investigate how supervisory enforcement actions (EAs) against banks affect their business borrowers. We find negative short-term valuation effects of EAs for large relationship borrowers, which are reversed after new loans are granted. Large non-relationship borrowers' valuations are unaffected by EAs, but turn negative after relationships are established with sanctioned banks. Additionally, sanctioned banks appear to offset uncertainty and reputational damage of EAs by improving credit terms and availability for relationship and non-relationship large businesses, but decrease credit availability to small businesses. The small business credit contraction may have significant negative economic consequences due to bank dependency and credit constraints.

By reviewing the theory underlying the design and interdependency of management control systems, I highlight the important role firm dynamics plays in our understanding of these control systems. I provide both theoretical and empirical extensions encouraging authors to explore more longitudinal studies to better understand the path dependency of control system design, how control system elements vary over time within a firm, and how the interdependent nature of individual control elements might vary.