Knowledge that Transforms

We examine the effects of mandatory board gender quotas on unregulated firms that are connected to regulated ones via interlocking directorates. After the introduction of quotas, connected firms significantly increase their share of female directors relative to similar unconnected firms. The spillover effects are substantial — at least as large as the direct effects on regulated firms, challenging previous claims that quotas have no broader impact on women in business. Our results suggest that quotas indirectly broaden the supply of candidates for connected firms, along dimensions that include, but are not limited to, gender.

We study how U.S. dollar fluctuations transmit through domestic supply chains in emerging markets. Large firms borrow in foreign currency and extend trade credit to domestic partners, exposing the supply chain to exchange rate risk. We develop a model where financially constrained suppliers pass through shocks to buyers, while unconstrained firms absorb them. Using quarterly firm-level data from 19 emerging markets, we provide empirical evidence consistent with the model’s predictions. We find that even highly exposed firms reduce trade credit only modestly following a depreciation, while accepting large profit losses, suggesting that firm-to-firm credit relationships partially shield downstream firms from financial shocks.

We examine the impact of lost intellectual property protection on innovation, competition, firm performance, and valuation. We consider firms whose ability to protect intellectual property (IP) using patents is weakened following a major Supreme Court decision. We use large language models (LLM) to identify firms’ patent portfolios’ exposure to this decision and find an unequal impact. Large firms gain and small firms lose. Large impacted firms benefit as their sales growth increases and their exposure to lawsuits decreases. Small impacted firms lose as they face increased competition, product-market encroachment, and lower profits and valuations. They increase R&D and nondisclosure agreements.

We document a global reallocation of pollutive assets as a response to investor pressure: large firms facing increased investor pressure divest foreign-located pollutive assets to firms that are less in the limelight. There is no evidence of increased engagement in any other emission reduction activities. We estimate that 369 million metric tons (mt) of CO2e are reallocated via divestments in the post-Paris Agreement period. Our results indicate that investor pressure to decarbonize reshapes the global conglomerate structure of large firms.

We show that US monetary policy is transmitted internationally through the factor structure of exchange rates. Following an easing of monetary policy, investment funds sell safe and buy risky currencies. Global US banks, similarly, tilt their distribution of foreign loan origination toward currencies with greater systematic currency risk. The effects of monetary policy on currency flows and loans persist for several months and feed into the leverage and real investment decisions of firms and, in particular, those that operate using a high-risk currency. We conclude that the risk factor exposure of currencies is a significant channel through which we can understand the international transmission of US monetary policy.

This study investigates how financial literacy shapes the propensity of individuals to commit financial crime. Using state-level administrative data on criminal charges linked to comprehensive public records , we exploit a policy-based discontinuity in grade level assignment based on individual birth dates that exogenously requires certain high school cohorts to attend a financial literacy course. Our estimates suggest that exposure to the course reduces the propensity to commit financial crime by 37%. The reduction is driven by declines in embezzlement and is stronger for low-income individuals. Additional evidence suggests that the reductions are primarily explained by improvements in household balance sheets.

Pandemic fraud is geographically concentrated and stimulated local purchases, with effects on prices. Recipients of fraudulent Paycheck Protection Program (PPP) funds significantly increased their home purchasing rate compared to recipients of non-fraudulent PPP funds, and house prices in high-fraud ZIP codes increased 5.8 percentage points more than in low-fraud ZIP codes within the same county. In a horse race, pandemic fraud is one of the largest and most robust factors explaining house price appreciation during COVID. ZIP codes with fraud also experienced heightened vehicle purchases and other consumer spending in 2020-21, with a return to normal in 2022.

This paper examines the causal role of face-to-face (F2F) interactions in generating local informational advantages for mutual fund managers. Using COVID-19 lockdowns as an exogenous shock, I show that fund managers’ performance on local stocks declined relative to distant stocks when in-person meetings were curtailed, driven by impaired investment timing rather than changes in firm fundamentals. I investigate two distinct benefits of F2F interactions arising from interpersonal cues: trust-building, which enhances the transmission of soft information, and impression management, which facilitates the transmission of favorable information. The results cannot be fully explained by changes in internal information flows or the use of public information, and are more pronounced for stocks in less transparent information environments and in regions with stronger social traits.