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I analyze the effects of bank competition on gender and racial gaps in entrepreneurship. By leveraging interstate bank deregulation from 1994 to 2021, I find that stronger bank competition increases the quantity and quality of banking services offered to minority borrowers. Developing a novel measure of discrimination using narrative information in the complaints filed with the Consumer Financial Protection Bureau, I demonstrate that bank competition reduces discrimination, alleviating the financial constraints of female and minority entrepreneurs. Stronger bank competition also reduces gender and racial gaps in firm performance and business equity accumulation, promoting wealth equality and fostering equitable economic growth.

This paper studies how the precision of noisy public information that investors receive about the expected aggregate dividend growth rate affects stock market returns. I show that less precise information can increase the risk premium and stock return volatility. The numerical results from my calibrated model also show that noisy information can significantly increase the risk premium and stock return volatility. My finding implies that the presence of noisy information may help explain the large average risk premium and return volatility in the U.S. financial market. In addition, my finding suggests it is optimal for firms to disclose to investors more precise information to reduce the cost of equity capital.

One striking feature of international portfolio investment is the extent to which equity portfolios are concentrated in the domestic equity market of the investor—the home bias puzzle. I examine the role of investors' perception of foreign investment risk on their portfolio choices. The expected returns and risk of foreign investment are specified through an asset pricing model with the home portfolio being the benchmark asset—Pastor's (2000) domestic CAPM. The model serves as a reference point around which investors can center their prior beliefs. I focus on investors' prior beliefs that are consistent with the literature on confidence in the familiar—foreign equities, in terms of both expected returns and risk, being viewed less favorably than domestic equities. These prior beliefs are then combined with the data on G7 equities, and the revised beliefs are used to obtain the global optimal asset allocation. To hold predominantly domestic equities, each G7 investor has to believe that the risk of foreign investment is several times higher than the actual risk. The home bias is more of a puzzle for a U.S. investor during the 1970s. Specifying investors' prior beliefs around the world CAPM does not help resolve the puzzle.

Using a large and novel data set over the period of 1976 to 2019 tracking inventors’ career paths following mergers and acquisitions, we show that collaboration between acquirer and target inventors post-merger is associated with more path-breaking patents than those filed by either acquirer or target inventor-only teams. We further show that such collaboration is more important in improving acquirers’ innovation capabilities than hiring target inventors and knowledge spillovers. Finally, we show that recombining tacit knowledge embodied in the human capital of acquirer and target inventors is likely the mechanism. We conclude that inter-firm inventor collaboration is one key means for achieving synergies.

We develop a multivariate credit risk model that accounts for joint defaults of banks and allows us to disentangle how much of banks’ credit risk is systemic. We find that the United States and United Kingdom differ not only in the evolution of systemic risk but, in particular, in their banks’ systemic exposures. In both countries, however, systemic credit risk varies substantially, represents about half of total bank credit risk on average, and induces high risk premia. The results suggest that sovereign and bank systemic risk are particularly interlinked in the United Kingdom.

We propose an explanation for the “disappearing dividend” phenomenon: a decline in the information content of dividend announcements, which reduces the propensity of firms to use dividends as a costly signal. A reason for a decline in the information content of dividends is the rise in holdings by institutional investors that are more sophisticated and informed. Indeed, we find a decline in CAR at dividend change announcements since the mid–1970s. Across firms, CAR is a decreasing function of institutional holdings. Institutional investors exploit their superior information and buy before dividend increases. In addition, dividends are less likely to rise in firms with high institutional holdings.

We model the employee incentive problem jointly with a firm’s exit decision. Our model predicts that firms in industries where human capital is important are more likely to go public and use high-powered, stock-based compensation. We also show that the higher the management quality, the more likely a firm is to go public than to be acquired. Regarding life cycle, a firm with high capital intensity and/or high management quality will choose to go public at a younger age.

Little evidence exists on whether boards help managers make better decisions. We provide evidence that strong and independent boards help overconfident chief executive officers (CEOs) avoid honest mistakes when they seek to acquire other companies. In addition, we find that once-overconfident CEOs make better acquisition decisions after they experience personal stock trading losses, providing evidence that a manager’s recent personal experience, and not just educational and early career experience, influences firm investment policy. Finally, we develop and validate a new CEO overconfidence measure that is easily constructed from machine-readable insider trading data, unlike previously used measures.