Knowledge that Transforms

Using a novel data set of multi‐country credit registers and an institutional change from national to supranational supervision, we show that supranational banking supervision can increase credit supply while mitigating excessive risk‐taking. Supranational supervision increases credit supply only in financially stressed countries while reducing the credit supply to the riskiest (zombie) firms. These improved lending effects stem from weaker national institutions, differential national supervisory incentives, lower national supervisory abilities, and weaker national insolvency laws. Moreover, improved access to external finance from wholesale and bond markets as well as lower risk‐weighted assets allow supranationally supervised banks to expand the supply of credit. Overall, despite some supranational supervisory arbitrage, supranational supervision decreases firm‐level credit to the riskiest firms while increasing firm‐level credit availability in stressed countries without reducing it in nonstressed countries.

We study whether easier monitoring of personal finances affects consumer spending. We use transaction data from an account aggregation company to study consumers who installed the mobile app after using the same service on a personal computer for several months. We utilize the staggered release of the apps on different devices (iPhone, iPad, and Android) to identify a causal effect conditional on adoption of the mobile app. Consumers decrease their discretionary spending following the installation of the mobile app. The decrease is larger during evening hours and among individuals with lower proxies of self‐control, patterns consistent with a monitoring/self‐regulation channel and with benchmark models of costly self‐control.

Person‐to‐person crowdfunding is an increasingly important form of disaster relief, yet its distribution is poorly understood. Linking GoFundMe campaigns from a major wildfire to property and household credit records, we find that higher‐income households are 12 pp more likely to have campaigns and raise over 25% more, holding property losses constant. These disparities reflect unequal access to social capital: broader donor bases, more nonlocal ties, greater advocacy by friends, and more generous donors. Donors appear influenced by social pressure in online crowdfunding. These mechanisms mirror national patterns and underscore crowdfunding's limitations as a tool for equitable disaster relief.

I develop a control function methodology robust to endogenous or mismeasured regressors in hazard models. Applying the estimator to the subprime mortgage crisis, I quantify what caused the foreclosure rate to triple across the 2003 to 2007 subprime cohorts. To identify the elasticity of default to housing prices, I use various home price instruments including historical variation in home price cyclicality. Loose credit played a significant role in the crisis, but much of the increase in defaults across cohorts was caused by price declines unrelated to lending standards, with a 10% price decline increasing subprime mortgage default rates by 50%.

The random assignment of judges promotes fairness and underpins causal identification across the social sciences. Analyzing Chapter 11 bankruptcies, we find sophisticated parties “judge‐shop”: relative to secured hedge fund creditors, cases involving unsecured hedge fund creditors and equity holders are assigned judges with lower past conversion rates and higher unsecured recovery rates. Experienced legal counsel similarly influences assignment. Because judges are not assigned consecutive large cases, knowledgeable parties can judge‐shop by timing the filing date. We develop a method to measure the resulting bias and demonstrate the need for controls and bounded instrumental variable specifications in judge/examiner designs.

Discretionary announcement timing generates high conditional risk premia of stock returns and a pattern of negative drifts followed by positive jumps. Average announcement returns are much larger than unconditional risk premia. Capital Asset Pricing Model alphas turn negative when conditioning on nondisclosure because betas rise faster than risk premia prior to disclosures, but average announcement returns may appear to be too large relative to market risk when betas are estimated from past returns. The effects are amplified when multiple firms exercise discretion over the timing of correlated announcements. We present evidence that firms time earnings announcements in a manner consistent with our model.

Annuities, long‐term care insurance, and reverse mortgages remain puzzlingly unpopular to manage post‐retirement longevity, health, and housing price risks. We use a flexible life‐cycle model structurally estimated with a unique stated‐preference survey experiment of Canadian households to understand why. Key factors include high risk aversion, concern over long‐run risks, strong discounting of valuation in disability states, imperfect housing substitutability, and bequest motives. The remaining disinterest is accounted for by information frictions and inertia. We also document evidence of public insurance crowding out, spousal co‐insurance, and responsiveness to product bundling.

We present a model of competition between environmental, social, and governance (ESG) raters who acquire information about multiple unrelated categories and sell ratings. Raters specializing in different categories maximize the amount of information transmitted and surplus, and can be an equilibrium outcome. When investors place a high value on ESG performance across multiple categories, the unique equilibrium is for the raters to generalize—splitting their effort among the categories, resulting in less informative ratings. Greenwashing by firms can make generalization the only equilibrium. We also demonstrate that specialization maximizes ratings disagreement, and thus empirical measures of disagreement may be poor measures of surplus.