We study the impact of the U.S. money market fund reform implemented in October 2016 on global banks' funding supply and business activities. We show that the reform induced a large negative wholesale funding shock for global banks. In contrast to the conventional bank lending channel, the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding, rather than a reduction in loan provision. We discuss the role of postcrisis liquidity regulations and unconventional monetary policy in explaining our findings, and implications for banks' business models and deposit competition.

This paper documents new stylized facts about returns and cashflow growth rates on stocks and housing over decade‐long holding periods. While cashflow growth rates on the two assets comove positively, their returns comove negatively until the Global Financial Crisis and positively thereafter. These facts present a puzzle for representative‐agent models that imply positive return comovement for assets with similar cashflows. I consider a heterogeneous‐agent model with segmented stock and housing markets connected through credit. News about the aggregate economy generates negative return comovement. Recent shifts such as wealthier homebuyers and institutional housing purchases reduce the importance of credit and segmentation.

Using confidential supervisory risk ratings, we document that banks increase risk after going public compared to a control group of banks that filed to go public but withdrew their filings for plausibly exogenous reasons. The increase in risk improves short‐term performance at the expense of long‐term performance. We argue that the increase in risk stems from pressure to maximize short‐term stock prices and earnings once the bank is publicly traded. After going public, banks owned by investors that place greater value on short‐term performance increase risk more, and those managed by CEOs with more short‐term compensation also increase risk more.

A war‐related factor model derived from textual analysis of media news reports explains the cross section of expected stock returns. Using a semisupervised topic model to extract discourse topics from 7,000,000 New York Times stories spanning 160 years, the war factor predicts the cross section of returns across test assets derived from both traditional and machine learning construction techniques, and spanning 138 anomalies. Our findings are consistent with assets that are good hedges for war risk receiving lower risk premia, or with assets that are more positively sensitive to war prospects being more overvalued. The return premium on the war factor is incremental to standard effects.

This article quantifies the effects of a multiday cyberattack that forced offline a technology service provider (TSP) to the banking sector. The attack impaired customers’ ability to send payments through the TSP, but the business continuity plans of banks and the TSP reduced the effect by more than half. Large banks performed better. Through contagion, banks not directly exposed to the attack experienced a liquidity shortfall, causing them to borrow funds or tap reserves. The ability to send payments after hours helped avoid further contagion. These results highlight the importance of preparedness by the private and official sector for cyberattacks.

We study supply‐and‐demand effects in the U.S. Treasury bill market by comparing the returns on T‐bills to the policy rate on the Federal Reserve's reverse repurchase (RRP) facility. We develop and test a simple model where the RRP‐bill spread is policed both by heterogeneously elastic money funds and by corporate treasurers who derive collateral benefits from holding T‐bills. In response to shifts in T‐bill supply, money funds act as front‐line arbitrageurs. However, when T‐bills become extremely scarce, less elastic corporate treasurers become the marginal investors and supply shifts have a larger effect on T‐bill rates.

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We use newly assembled data overall encompassing up to 75 countries and starting circa 1910, to study impediments to the Schumpeterian process of creative destruction as it “proceeds by competitively destroying old businesses.” Political connections appear to represent an obstacle to the destructive part of the Schumpeterian process in the replacement of large firms. When accompanied by regulations that restrict entry, political connections can play a role in allowing large firms to remain large. When connected to Fogel, Morck, and Yeung (2008, Journal of Financial Economics 89, 83–108), the results imply that political connections, combined with barriers to entry, can retard economic development.

Steve has made academic contributions to the study and understanding of private equity (PE), LBOs, venture capital (VC), corporate finance, corporate governance, and top executive talent.That work has also influenced industry/practitioners.Nineteen of his papers have accumulated more than 1,000 citations in Google Scholar including at least one in each of the five decades since the 1980s.Kaplan's work on PE began with his doctoral dissertation on LBOs.LBOs emerged

Aggregate U.S. bank lending to firms expanded following the outbreak of COVID‐19. Using loan‐level supervisory data, we show that this expansion was driven by draws on credit lines by large firms. Banks that experienced larger credit line drawdowns restricted term lending more, crowding out credit to smaller firms, which reacted by reducing investment. A structural model calibrated to match our empirical results shows that while credit lines increase total bank credit in bad times, they redistribute credit from firms with high propensities to invest to firms with low propensities to invest, exacerbating the decrease in aggregate investment.