Which financial frictions drive firms’ financing constraints? We structurally estimate dynamic firm financing models embedding many financial frictions, on panels of public firms and private firms. We focus on limited enforcement, moral hazard, and trade-off models and assess which models rationalize best observed corporate policies across various samples. Our tests, based on empirical policy function benchmarks, favor trade-off models for larger public firms, limited commitment models for smaller public firms, and moral hazard models for Private firms. Our estimates suggest significant financing constraints due to agency frictions and highlight the importance of identifying their sources for firm valuation.

In contrast to cash holdings, credit lines give firms financial flexibility by providing liquidity contingent on realized funding needs, but they are often limited by collateral and covenants. We embed this trade-off into an estimated dynamic model of financing and investment. Our model highlights the relevance of drawing down credit lines to fund investment options in an effective way and quantitatively matches well the levels and dynamics of cash, credit lines, and leverage. In the cross-section, modeling credit lines as contingent liquidity provides novel empirical predictions and rationalizes several stylized facts regarding credit line usage, covenant violations, and cash holdings.

Can electoral institutions induce lasting changes in citizens’ voting habits? We study the long-term and spillover effects of compulsory voting in the Swiss canton of Vaud (1900–1970) and find that this intervention increases turnout in federal referendums by 30 percentage points. However, despite its magnitude, the effect disappears quickly after voting is no longer compulsory. We find minor spillover effects on related forms of political participation that also vanish immediately after compulsory voting has been abolished. Overall, these results question habit formation arguments in the context of compulsory voting.

We quantify the impact of risk‐based and nonrisk‐based intermediary constraints (IC) on the term structure of covered interest rate parity (CIP) violations. Using a stochastic discount factor (SDF) inferred from interest rate swaps, we value currency derivatives. The wedge between model‐implied and observed derivative prices reflects the impact of nonrisk‐based IC because our SDF incorporates risk‐based IC. There is no wedge at short horizons, while the wedge accounts for 40% of long‐term CIP violations. Consistent with IC theory, the wedge correlates with the shadow cost of intermediary capital, and the SDF‐implied interest rate is a weighted average of collateralized and uncollateralized interest rates.